Piper Jaffray Downgrades Altera, Cites Valuation - Altair Engineering (NASDAQ:ALTR)

Piper Jaffray on Wednesday issued a note on

Altera Corporation

ALTR

, downgrading the company from Overweight to Neutral. Piper Jaffray's price target is $42. Analysts Ruben Roy and Shawn Lockman wrote, "While we continue to view the longer-term prospects for the programmable logic device companies favorably and we view ALTR as better positioned near-term versus Xilinx, recent potential M&A spurred share price appreciation has lifted ALTR valuation above fundamentals based fair value, in our view...we think that an acquisition by Intel of ALTR would make sense given multiple reasons including 1. foundry partnership, 2. historical collaboration on INTC CPU + ALTR FPGA solutions going back to the 2011 "Stellarton" product family, and 3. ALTR's recent focus and traction into data center markets." Piper Jaffray believes that an acquisition by

Intel would create value because of Altera's recent focus and progress into data center markets. Altera's management has determined the value of overall data center opportunities to be around $1 billion by 2020. This rapidly expanding market can provide multiple opportunities for growth. Furthermore, given the maturing PC market and Intel's slow growth in the mobile computing markets, adding a leading edge, higher margin company to Intel could be positive for positive. The data center group is Intel's fastest growing and most profitable business with 51 percent operating margin in 2014. Shares of Altera were trading at $42.84, down 0.9 percent.

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