Several firms are commenting on PMC-Sierra (NASDAQ:PMCS) after the co pre-announced lower than expected revs last night:
- Goldman Sachs notes weak trends related to communications infrastructure had also been cited in recent soft business updates from Altera, Exar, Lattice, and Xilinx, and they had noted potential risk for others with high comms exposure, such as PMC-Sierra, Applied Micro Circuits, Broadcom, and Marvell. Hence, the firm would not expect the incremental softness in PMC-Sierra's business to be viewed as much of a surprise, though magnitude of 4Q's qoq decline is still disappointing. They expect bookings and visibility are limited throughout the industry, which could also restrain 1Q outlooks. Tgt is adjusted to $7.50 from $8. Maintains Neutral.
- Merrill Lynch's Srini Pajjuri thinks that while the inventory correction in telecom appears to be nearing an end, demand appears to have weakened a bit due to pending mergers in the industry. Orders from China also appear somewhat weak, which he thinks was due to capex cuts in anticipation of 3G. Storage and enterprise, which accounts for 50% of sales, appears healthy and Mr. Pajjuri expect these businesses to grow in Q4.
Given the recent negative telecom semi news flow out of Xilinx, Altera, and Exar this quarter, the firm is not entirely surprised at the negative outlook revision. However, they believe that we're nearing the bottom, and expect the stock to outperform over the next twelve months driven by a healthy storage market, a rebound in FTTx and telecom revenue growth, and potential 3G deployments in China. Valuation appears attractive at 24x CY07 EPS for a company with 15 percent growth potential and 65 percent plus gross margins.
Maintains Buy.
- Prudential notes they expected DecQ revenues to come in at the low end of original DecQ guidance of $105 million due to concerns about the consolidation at the OEM's and service providers as well as elevated inventory levels and therefore they are not changing their estimates.
Worth noting is Jabil, one of the largest EMS players, which also announced results for its NovQ and inventory days were flat QoQ , near four year highs at 45 days. This preliminary data point supports firm's thesis that supply chain inventories will take until Q2'07 before inventories return to normal levels.
They are maintaining theirprice target of $6 and remain Neutral Weight the stock.
Notablecalls: The stock traded as low as $6.50 in after hrs. Think levels around $6.30-40 make it buyable again. For a trade, ofc. Longer term, I suspect the stock is headed towards lower levels. High fives go to Alex Gauna and Steven Chin from UBS for their cautious call made on PMCS Dec 11 (see archives). UBS is taking their tgt to $8.50 from $9 this AM but maintains Buy rating.
- Goldman Sachs notes weak trends related to communications infrastructure had also been cited in recent soft business updates from Altera, Exar, Lattice, and Xilinx, and they had noted potential risk for others with high comms exposure, such as PMC-Sierra, Applied Micro Circuits, Broadcom, and Marvell. Hence, the firm would not expect the incremental softness in PMC-Sierra's business to be viewed as much of a surprise, though magnitude of 4Q's qoq decline is still disappointing. They expect bookings and visibility are limited throughout the industry, which could also restrain 1Q outlooks. Tgt is adjusted to $7.50 from $8. Maintains Neutral.
- Merrill Lynch's Srini Pajjuri thinks that while the inventory correction in telecom appears to be nearing an end, demand appears to have weakened a bit due to pending mergers in the industry. Orders from China also appear somewhat weak, which he thinks was due to capex cuts in anticipation of 3G. Storage and enterprise, which accounts for 50% of sales, appears healthy and Mr. Pajjuri expect these businesses to grow in Q4.
Given the recent negative telecom semi news flow out of Xilinx, Altera, and Exar this quarter, the firm is not entirely surprised at the negative outlook revision. However, they believe that we're nearing the bottom, and expect the stock to outperform over the next twelve months driven by a healthy storage market, a rebound in FTTx and telecom revenue growth, and potential 3G deployments in China. Valuation appears attractive at 24x CY07 EPS for a company with 15 percent growth potential and 65 percent plus gross margins.
Maintains Buy.
- Prudential notes they expected DecQ revenues to come in at the low end of original DecQ guidance of $105 million due to concerns about the consolidation at the OEM's and service providers as well as elevated inventory levels and therefore they are not changing their estimates.
Worth noting is Jabil, one of the largest EMS players, which also announced results for its NovQ and inventory days were flat QoQ , near four year highs at 45 days. This preliminary data point supports firm's thesis that supply chain inventories will take until Q2'07 before inventories return to normal levels.
They are maintaining theirprice target of $6 and remain Neutral Weight the stock.
Notablecalls: The stock traded as low as $6.50 in after hrs. Think levels around $6.30-40 make it buyable again. For a trade, ofc. Longer term, I suspect the stock is headed towards lower levels. High fives go to Alex Gauna and Steven Chin from UBS for their cautious call made on PMCS Dec 11 (see archives). UBS is taking their tgt to $8.50 from $9 this AM but maintains Buy rating.
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