Thursday, April 19, 2007

Calls of Note Part 2

Couple of more interesting comments on last night's earnings movers:

- ThinkEquity's Suresh Balaraman comments on Novellus Systems (NASDAQ:NVLS) saying that while foundries should emerge from depressed levels, he expects Novellus to be vulnerable to slowdown in the memory segment. The firm is lowering estimates for 2008 and trimming their price target to $34 from $36. They estimate that the near-term downside to NVLS shares is $26.

ThinkEquity believes orders could average $350M +/- $30M in Q2 and Q3. While they anticipate foundries and advanced logic will emerge from moribund levels, it may not be sufficient to offset weaker memory spending. While they expect Vista to eventually emerge as a driver for DRAM, they believe any meaningful capacity addition will not be forthcoming from the memory segment until early 2008. Firm believes there is sufficient memory capacity to support the demand through the rest of the year.

Firm's price target of $34 assumes that order rates should approach around $380M over the next several quarters after a dip to $320M. It also reflects 15% normalized net margin and a 15 multiple. In the near term, the bookings could potentially dip to as low as $320M, causing stock price downside to $26 (12.5% net margins, 15 multiple).

Notablecalls: Think there may be some more downside in NVLS, in addition to weakness seen in after hours action.

- Deutsche Bank comments on eBay (NASDAQ:EBAY) saying that while the stock will likely trade up slightly today, they think that the stock should come back in to the low-$30s, particularly as investors dig into the underlying metrics (suggesting far slower growth in GMV and transactions than expected).

Notablecalls: As I said, I don't see favourable risk/reward here.

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