FBR Capital Markets Reiterates Outperform Rating, $8.25 PT on Atmel Corporation as Recent Sell-Off Creates Opportunity

In a report published Wednesday, FBR Capital Markets analyst Christopher Rolland reiterated an Outperform rating and $8.25 price target on Atmel Corporation ATML. In the report, FBR Capital Markets noted, “We designate shares of Atmel Corporation (ATML) as an FBR Top Pick, as ATML shares are down nearly 17% from recent highs (S&P 500 up 1%) despite what we believe is an improving fundamental story. Importantly, we think PC touch attach rates are finally rising, evidenced by a substantial number of new touch PC designs at Sony, Lenovo, Asus, and Samsung launching in 4Q13/1Q14. In addition to notebook PCs, maXTouch, we understand, will be designed into a number of convertible Bay Trail PCs coming to market over the next few quarters. We believe PC touch is an essential part of the ATML story, as it provides an extremely profitable source of incremental earnings. Overall, we think the Street underestimates all, or a portion, of the following: (1) new sensor hub opportunities; (2) a strong cyclical recovery in the core MCU business, also benefiting the ASIC and RF units; (3) Win8 touch PC wins; and (4) growing XSense demand in late 2013 and, more importantly, in 2014. Additionally, the unwinding of the take-or-pay LFoundry agreement and higher utilizations should drive gross margin expansion of approximately 400 bps over the next six quarters, benefiting the bottom line. We continue to rate ATML Outperform with an $8.25 price target, based on a 19x P/E multiple (2014).” Atmel Corporation closed on Tuesday at $6.99.