Monday, September 10, 2007

Sirf Tech (NASDAQ:SIRF): Inflection point is here! Actionable

- Deutsche Bank is out with a wonderful call on SiRF Technology (NASDAQ:SIRF) saying their checks suggest that there will be two MOT phones launching in 07 with SIRF's GPS technology embedded (the Q9, plus one other). There were multiple members of management with an AT&T labled Q9's (SIRF inside) at the MOT conference. In CY08, the firm anticipates eight other Motorola devices will launch with SIRF's GPS technology embedded including phones targeting China (GSM/EDGE) and Europe (WCDMA/HSDPA).

Deutsche expects some of these phones will be high volume devices and remains comfortable with their forward mobile handset forecasts for SIRF. Bottom line, this is the inflection point they have been waiting for on this stock and reiterate Buy rating and $30 price target.

Notablecalls: SIRF stock is way down from its February highs ($34) as investors have become concerned that SiRF's high market share in PNDs (personal navigation devices) may come under pressure from competitors and PND customers seeking to dual source their GPS chipset supplier base. Currently, SIRF is the dominant supplier (70-80% share) of GPS silicon into the portable navigation device (PND) market. PND vendors (Garmin, TomTom etc) have accelerated pricing declines for PNDs to around 30% annually in order to drive demand elasticity. That means SRIF's ASPs will continue to erode at a similar pace, putting current high margins at risk.

Yet, I think that around current levels ($17), most of these concerns are priced in. What the market seems to be missing is that the mobile phone market has the greatest potential and will likely grow to be the largest over time. Wireless carriers and handset manufacturers have already begun to drive the introduction of an increasing number of GPS enabled mobile phones and services.

This is the inflection point Deutsche Bank is talking about in their call. Smartphones are coming! Handset makers get way better margins on smartphones, wireless carriers will get to charge way more for data services. SIRF stands to benefit from this.

Last week Deutsche said that while still early in Q3, they believe the company is trending towards at least in-line results with this the best quarter for seasonal upside to ests. Motorola is coming with the Sirf enabled Q9, which indicates the ramp of Sirf's GPS chips at MOT has started. Also, RIM is reportedly seeing good demand with the Sirf enabled 8300 BB.

On top of this, short interest in SIRF stock stands at a whopping 18%.

Ladies and gentlemen, I think this Deutsche call is Actionable. I expect to see some serious buy interest in SIRF over the coming weeks.


TRB said...

I think things have to get worse before they get better. Fresh 52 week lows are quite possible.

notablecalls said...

Whats the reasoning behind your view?