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National Semiconductor Not Insulated from Risk


Will it really be able to poke through a new 52-week high?

California-based National Semiconductor (NSM) has had a pretty sweet run this year as is evidenced by a quick gander at a recent chart. But will its run continue? And will it be able to poke through a new 52-week high?

Here are some of my thoughts ahead of the company's second-quarter numbers, which are due out on December 10.

1. The chip company is coming off a solid quarter. (In fact, to read what I wrote about the company just after the first-quarter release, see Ticker Shock: National Semiconductor Amplifies Good News.) It's thumped expectations in a big way in the last three reported quarters, which really makes me want to pay attention.

2. Right now the Street is looking for $0.14 on revenues of a smidge over $336 million in its second quarter. I feel it will beat that estimate as well. If I'm right and it does come in better than the analysts expect, the shares could have some legs and possibly make a new high.

3. But the value guy in me isn't getting excited. Right now, the estimate for next year is $0.89. For a stock that trades just a bit over $15, that's not crazy cheap.

4. There's a chance the stock can hit a new 52-week high, or come close in the short-term (in and around earnings). And long-term -- meaning three to five years out -- I think it heads higher. That being said, there's a chance the shares could end up pretty much right where they are -- just north of $15 -- a year from today. And because of that, I plan on collecting my share of splinters sitting this one out on the bench.

When I hear the word "chip" these days I tend to immediately think of two things (besides the Lay's BBQ brand): Texas Instruments (TXN) and Intel (INTC). I'm hip on both because they have solid upside potential from current levels (see Despite Taking a Beating, Intel Is Still Attractive).

Hey, have a great day!
No positions in stocks mentioned.

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