Analyst: Fairchild Semiconductor 'Remakes Itself,' Is Now A Buy

In a report published Tuesday, Drexel Hamilton analyst Richard Whittington initiated coverage on

with a Buy rating and a price target of $25. The rating reflects "end market visibility" combined with the company's "manufacturing initiatives that substantially improve earnings power," the analyst said. In the report, Drexel Hamilton noted, "2015 should see Fairchild build upon 2014's success in autos, battery charging, industrial motion, comm. infrastructure and data center, driving sales, margins and earnings well above recently reported levels." "Following a sharp late 2014 inventory drain, Q1 2015 is off to a robust start, bookings running above a $400mn run rate vs. $340mn-$360mn sales guide, providing upside for sales and EPS as the year progresses. We see 2015 sales up 6.7% versus 2014's $1.43bn, itself 2.0% above 2013, followed by a projected 5.6% gain in 2016, rising capacity utilization elevating margins and non-GAAP EPS respectively 56.8% and 53.1%," the analyst wrote. "Playing off recently upscaling economic recovery in the U.S., Germany and China, our Q1 sales estimate is potentially conservative as Fairchild's focus on power efficiency gains traction across targeted applications," the analyst said, while adding, "Mirroring many the last two decades, FCS aims to move from standard products to a more differentiated, applications focus on energy and power-savings, prospectively pushing profitability much higher."