Maybe, size ultimately matters and Micron and Seagate Technology PLC (NASDAQ:STX) will eventually eat the lunch of Fusion-IO, Inc. (NYSE:FIO) by converting to flash storage options just as the sector takes off. Unfortunately, sometimes firms aren’t able to convert a hot new technology into a commanding lead as the giants wake up and overthrow the challenger before it gains enough scale.
With the inability of Fusion-io to derive significant profits from those two large customers, it is now stuck with a much higher PE ratio than both Micron and Seagate. The later trades at a remarkably low 8 times forward earnings even after seeing strong gains. In addition, Seagate offers a 3.4% dividend yield on top of that.
Micron isn’t too far behind with a 15 times forward earnings multiple and could see more gains if earnings estimates for fiscal 2014 continue to jump. The stock doesn’t offer the dividend yield, but analysts are becoming ever more bullish on earnings next year. The expectations have jumped from $0.65 to $0.95 with the high-end analyst forecasting $1.40.
Fusion-io doesn’t appear to be a tech stock headed back to glory. The negative analysts expect competitive pressures to erode market share while the bullish analysts expect strong revenue growth. Unfortunately, neither group expects the future to be overly positive to earnings as the numbers hover below the reported earnings for fiscal 2012. Until Fusion-io shows the ability to fend off competitors with profitable growth, investors need to avoid this stock even at all-time lows.
The article Will This Busted Tech Stock Ever Return to Glory? originally appeared on Fool.com and is written by Mark Holder.
Mark Holder and Stone Fox Capital Advisors, LLC have no positions in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Mark is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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