Anadigics Slips to Sell - Analyst Blog

On May 13, Zacks Investment Research downgraded Anadigics Inc ANAD to a Zacks Rank #4 (Sell) from a Zacks Rank #3 (Hold), primarily due to downward estimate revisions. Anadigics has been incurring losses over the last few quarters and we do not expect the company to return to profitability before 2016.

Despite the downtrend, the company still has the potential to drive the stock up. The growth expectation for the next five years is pegged at 20%.

Why the Downgrade?

Anadigics reported unimpressive first-quarter 2014 results with revenues declining year over year and losses due to headwinds in core markets. The company incurred an adjusted net loss of $9.6 million or 11 cents per share in first-quarter 2014, narrower than the loss of $14.8 million or 20 cents per share in the year-ago quarter. The adjusted loss was narrower than the Zacks Consensus Estimate of a loss of 12 cents.

Total revenue for first-quarter 2014 was $23.3 million, down 11.8% year over year. Revenues missed the Zacks Consensus Estimate of $24.0 million.

Over the last 30 days, most of the earnings estimates for Anadigics have been revised downward for 2014. Although gross margin improved in the reported quarter, it continues to be under pressure from underutilization of capacity as manufacturing costs are relatively fixed. The company needs to generate higher revenues to offset these costs. The company's weaknesses can be seen in the disappointing historical performance in the stock itself.

Other Stocks to Consider

Other stocks that look promising and are currently worth considering include Exar Corp. EXAR, Applied Micro Circuits Corp. AMCC and PLX Technology Inc. PLXT, each carrying a Zacks Rank #1 (Strong Buy).