Thursday, June 29, 2006

Calls of Note Part 3

- Jefferies says they view Jabil Circuit (NYSE:JBL)'s $200 million repurchase authorization as a sign that the management believes its stock is undervalued and last quarter's hiccup is not indicative of a longer-term problem at the company.

Jabil maintains a strong balance sheet and exited fiscal 3Q06 with $855 million in cash and total debt of $356 with a debt to capital ratio of 12%. Firm continues to believe investors that can see through Jabil's near-term issues and focus on the company's normalized earnings power have a rare opportunity to buy one of the fastest growing technology companies over the past decade at a discount. Reits Buy and $36 tgt.

Notablecalls: Agree with Jefferies here. Buying JBL at current levels will work.

- Banc of America has an interesting note on Maxim Integrated Products (NASDAQ:MXIM) noting that perhaps no stock within firm's semiconductor universe has witnessed a fall from grace akin to the one Maxim has. To wit, this erstwhile darling of semiconductor investors is trading near its lowest level since Mar '03, and has (in uncharacteristic fashion) underperformed the SOX by 17% since the most recent cyclical trough in 2005.

What ails the stock? Mainly the strategic change in business model to target lower margin-higher growth segments, that has in turn adversely impacted the company's GM model.

The stock is now trading at 12.5x CY07 consensus pro-forma EPS est.(cash adj) or its lowest multiple in nearly 10 years. With Maxim's long-term growth rate set to accelerate - at least modestly - following the increased focus on higher growth businesses - and operating margins set to remain flat near 44% despite the forecasted GM erosion, the firm thinks the current valuation fails to capture their belief that Maxim is set to grow sales and earnings at a 16-18% clip over the foreseeable future. Maintains Buy and $50 tgt.

Notablecalls: Excellent call by BofA. I don't think it's outright actionable but should add MXIM to investor radars.

No comments: