Bank Of America Downgrades Altera Corporation

Bank of America downgraded Altera Corporation ALTR Friday from Buy to Neutral and raised its price target from $38 to $41.

Analysts led by Vivek Arya liked “Altera’s highly profitable PLD business model; its progress in data center; and upside potential from foundry relationship with Intel. Recent opex (only 2.7 percent YoY growth in 2015) and GM guidance (67-69 percent) for 2015 was promising, and suggests good leverage in the model.”

The price target was “based on 21x 2016 PE, which is at higher-end of 5-year range of 12x-24x, but justified by: 1) the strong 21/11 percent YoY EPS growth we project in 2015/16; 2) sector-leading dividend growth profile; 3) model leverage; and 4) ongoing buybacks with ~$10/sh net cash,” (ex-cash would be 14x 2015 PE at the $41 PT).

Altera Corporation recently traded at $36.85, down 1.70 percent.