Silicon Motion Tech Is Down 38% In Two Months. Buy The Dip?

In a report published Monday, Pacific Crest analyst Monika Garg upgraded the rating on Silicon Motion Technology Corp. (ADR) SIMO to Outperform, with a price target of $32. The analyst expressed optimism regarding the company's growth opportunities in the client SSDs market. Although the stock has decline 28 percent over the past couple of months, driven by the weak demand in China, the analyst believes that the stock is likely to benefit from increased market share and penetration of the client SSDs market. The analyst expects the company's client SSD controller revenue to increase from an estimated $16 million in 2014 to close to $60 million in 2015, with another over 50 percent growth in 2016. According to the Pacific Crest report, "Silicon Motion could have the highest share of the merchant controller market by next year and close to 40% share by 2016-2017. The company is gaining share over its closest competitor Marvell Technology Group Ltd. MRVL." Silicon Motion is also expected to gain growth opportunity via the recently acquired Shannon Systems. The analyst expects Shannon Systems to grow at least at the same level as the enterprise SSD market, at more than 30 percent, year on year.