Calls of Note Part 2

- Merrill Lynch notes that now that they've had a chance to see the numbers from most of Maxim's (NASDAQ:MXIM) competitors, they figured we'd offer a quick recut of their Maxim estimates prior to the release later today. It's clear that consensus estimates are too high, and although that's reflected in the stock to some extent they think there could be a slight negative reaction when the company reports.

Specifically, the firm thinks that revenue is likely to show a 3% sequential decline in the December quarter, and then a 1% decline in the March 2007 quarter, prior to beginning to recover later in 2007. That's consistent with the inventory clearance pattern that they're seeing elsewhere in the semiconductor business. The result is that FY07 earnings estimate drops from $1.43 to $1.33, while FY08 number declines from $1.67 to $1.57 (Consensus: $1.44/ $1.73).

Maxim now trades on 21x calendar 2007 earnings estimate (note that the company's fiscal year ends in June), which isn't cheap. Like so many of the analog companies the firm covers the P/E doesn't account for the company's cash hoard, and on an EV/2007 EBITDA multiple of 11.3x the stock looks a lot better. They're buyers of the stock with a $49 target. Maintains Buy.

Notablecalls: Not entirely sure MXIM will go down following the note. In case you do short this one, keep it on a tight leash.