Flash!

05/14/2004 12:00 am EST

Focus:

Vivian Lewis

Editor and Publisher, Global Investing

With her focus on lesser-known global firms, and his focus on options, it's not often that Vivian Lewis and Bernie Schaeffer would overlap on a recommendation. However, both top advisors are bullish on the prospects for Israeli high tech M-Systems Flashdisk.

"M-Systems Flashdisk (FLSH NASDAQ), an Israeli tech firm, markets data storage products (flash disks), which provide the functionality of a hard drive on a silicon chip," notes Vivian Lewis, editor of Global Investing . "Recently, the company was briefly under a cloud. The stock nose-dived when Nokia reported a loss of market shares. Investors felt this might hurt FLSH’s sales volumes. In our opinion, FLSH might not be hurt short-term at all by Nokia’s woes as it has agreements with a half dozen other cell-phone makers. Meanwhile, M-Systems reported first quarter results that were even better than expected, with revenues up 33% sequentially to $64.2 million and net profit at $0.11 a share, nearly double the previous quarter. FLSH also is not sitting on its laurels. Its Fortress Security Division, cryptographic and data encryption specialists, and Britain’s Emblaze Semiconductor are jointly developing embedded security solutions for next-generation multimedia mobile. Emblaze will integrate M-Systems’ cryptographic co-processors and application program interfaces into its semiconductor products to be sold to the mobile industry. Content providers want to secure rights preventing copying and illegal use, while mobile-commerce requires secure transactions and carriers are looking to secure expensive handsets from theft and code manipulations. FLSH is a buy in our speculative portfolio."

"M-Systems Flashdisk has been a strong performer lately, besting its peers on the NASDAQ Composite for the past year," says Bernie Schaeffer, editor of The Option Advisor. "The stock has also rallied 300% during this time frame on the support of its ten-month trendline. Currently, FLSH is rebounding off support at its ten-week trendline (located in the 20 area). What's more, the company lifted first-quarter guidance on April 19 to nine cents per share compared to its previous forecast of six cents per share. Despite this show of strength, investors remain skeptical of the security. Short interest soared 211% over the past month to 2.9 million shares. An unwinding of these bearish bets could boost FLSH higher. The equity continues to fly below Wall Street's radar, as only six analysts follow the firm. Of those six, three rate the stock a 'buy' and three rate it a 'hold'. Any additional coverage or upgrades could propel the stock higher. Our recommendation for options traders is to buy the M-Systems Flashdisk October 17.50 call."

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