- CIBC notes that RF MicroDevices (NASDAQ:RFMD) remains firm's favorite RF component company. Although prospects for gross margin expansion appear modest from current levels, they believe that revenue growth, driven by seasonal strength in 2H06 and content gains in 3G handsets, may provide upside to our current EPS expectations. In firm's view, they believe that RFMD could achieve operating margins in the 15% range with gross margins of 37%.
Despite recent concerns of loss of share at Motorola to Freescale and Skyworks, they believe that the company is maintaining its strong position at both MOT and NOK. Moreover, they believe RFMD will benefit as these two OEMs in particular are likely to have strong 2H06 results based on both overall handset demand and continue market share growth. Firm believes that RFMD is already seeing an increase in demand from these customers in typical seasonal fashion and that this increased demand is likely to deliver upside to RFMD's C3Q06 results and C4Q06 expectations. Moreover, the firm believes that RFMD could deliver a still stronger 2007 as EDGE demand increases.
RFMD shares currently trade at 1.7x CY07E TEV/sales, a premium to the company's closest comp Skyworks (at 1.1x) and in line with the peer group. In firm's view, RFMD continues to grow market share and increase its relative dollar content in handsets with its Polaris transceiver and front-end modules. In addition, the company expects to see growth in its wireless connectivity business with Bluetooth, GPS and WLAN products. Therefore, they believe the shares are attractively valued and reiterate Outperform rating.
Notablecalls: Not actionable but good to know category.
Despite recent concerns of loss of share at Motorola to Freescale and Skyworks, they believe that the company is maintaining its strong position at both MOT and NOK. Moreover, they believe RFMD will benefit as these two OEMs in particular are likely to have strong 2H06 results based on both overall handset demand and continue market share growth. Firm believes that RFMD is already seeing an increase in demand from these customers in typical seasonal fashion and that this increased demand is likely to deliver upside to RFMD's C3Q06 results and C4Q06 expectations. Moreover, the firm believes that RFMD could deliver a still stronger 2007 as EDGE demand increases.
RFMD shares currently trade at 1.7x CY07E TEV/sales, a premium to the company's closest comp Skyworks (at 1.1x) and in line with the peer group. In firm's view, RFMD continues to grow market share and increase its relative dollar content in handsets with its Polaris transceiver and front-end modules. In addition, the company expects to see growth in its wireless connectivity business with Bluetooth, GPS and WLAN products. Therefore, they believe the shares are attractively valued and reiterate Outperform rating.
Notablecalls: Not actionable but good to know category.
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