FBR Capital Markets Sees Healthy Core Business for Applied Micro Circuits Corporation

In a report published Tuesday, FBR Capital Markets analyst Christopher Rolland reiterated an Outperform rating and $12.00 price target on

. In the report, FBR Capital Markets noted, “Overall, we believe revenues and gross margins will likely benefit from the transfer from SONET to OTN in metro networks, and we think AMCC's core business is healthy enough to provide moderate opex funding for X-Gene, until which point the product can sustain itself. At current valuation, we believe the market is attributing little value AMCC's X-Gene microserver SoC platform, the payout probabilities for which, in our opinion, carry a long and fat tail. We rate AMCC Outperform with a $12 price target, representing an EV/sales multiple of ~3x (2015E), appropriate, we believe, given the growth profile of the current business and the ‘option value' around X-Gene.” Applied Micro Circuits Corporation closed on Friday at $9.12.