UPDATE: Wunderlich Downgrades Standard Microsystems to Hold
Wunderlich Securities has published a research report on Standard Microsystems (NASDAQ: SMSC) and has downgraded the stock from Buy to Hold after the company announced its acquisition by Microchip (NASDAQ: MCHP) for $37/share.
In the report, Wunderlich writes, "The shares had already traded cheaply for an extended period of time and given the company's earnings and revenue growth prospects, we believe the deal is a fair price at 1.6x EV/Sales and 19.2x EV/EPS based on our FY13 estimates. We had been modeling for the company to grow revenues 3% y/y in 2012 and 6% y/y in 2013, which was a combination of slower industrial and PC sales, offset by strong growth from the Auto and Wireless Audio businesses. We also view the deal as another validation of the need for semiconductor companies to achieve a critical amount of scale in order to compete effectively while being able to support profitable operating models and future growth. SMSC had failed to achieve this previously with the ill-fated Conexant bid, but has effectively solved this issue now. We continue to think other, smaller players in the industry are ripe take over targets that could offer attractive IP and products to larger companies."
Wunderlich has raised the price target from $20 to $37 on Standard Microsystems, which is currently trading up $10.07 from yesterday's $26.24 closing price.
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