Netlist Inc. (NLST:OTCMKTS) announced better-than-expected growth in product revenue in the fourth quarter of 2023 compared to the previous quarter, reported Roth MKM analyst Suji Desilva in a February 13 research note. The company said this was most likely due to market demand and pricing.
Desilva said they anticipate that this trend will move along into CY24, as they keep an eye on updates in litigation on various fronts that may move the share.
The revenue for the fourth quarter of 2023 was strong, according to Desilva, with revenue recovery reported at US$33.4 (a 100% increase quarter over quarter).
"We believe NLST is benefiting from recovering DRAM/NAND memory market dynamics as end demand recovers and channel supply-demand dynamics come better into balance versus the majority of CY23," Desilva wrote.
At 3.5%, product gross margins continued to be below trend, and expenses in litigation declined by 25%. However, these litigation expenses continue to stay high while Netlist moves along over the next few quarters.
Desilva commented, "We believe NLST’s year-end cash balance of $52.9m, which includes the $~30m through a registered direct offering, positions the company to execute on its near-term plan."
They believe there are several potential positive legal developments on the horizon for Netlist in the first half of 2024. Combined with improving conditions in the overall memory market, including rising demand, higher prices, and easing supply chain issues, Desilva thinks Netlist can grow its revenues back to previous peak levels over the next few quarters.
With this, Desilva wrote that they maintained their Buy rating and gave the company a US$2 target price.
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Disclosures for Roth MKM, Netlist Inc., February 13, 2024
Regulation Analyst Certification ("Reg AC"): The research analyst primarily responsible for the content of this report certifies the following under Reg AC: I hereby certify that all views expressed in this report accurately reflect my personal views about the subject company or companies and its or their securities. I also certify that no part of my compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in this report.
Disclosures: Within the last twelve months, ROTH Capital Partners, or an affiliate to ROTH Capital Partners, has received compensation for investment banking services from Netlist Inc.. Shares of Netlist Inc. may be subject to the Securities and Exchange Commission's Penny Stock Rules, which may set forth sales practice requirements for certain low-priced securities.
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