Stephens Is Buying Integrated Device Tech On Weakness; Stock Plummets Over 22%

On Tuesday, Stephens issued a company report on Integrated Device Technology Inc IDTI after the company reported fourth-quarter earnings and revenue of $0.35 and $177.6 million, meeting consensus estimates.

Currently, analysts at Stephens rate Integrated Device Technology as Overweight with a $32 price target.

Harsh Kumar, an analyst at Stephens, wrote, "We would be buyers of IDTI on weakness as we believe the near term is being impacted by [...] margin impact from the ZMDI acquisition prior to synergies. However, we believe ZMDI offers significant opportunities to accelerate top-line growth and earnings potential as synergies are realized over the coming year. We believe this acquisition could drive upside to estimates for the next 4–5 quarters."

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Stephens offered two reasons they would invest in Integrated Device Technology:

• 1. Strong Cash Flow Generation: Analysts noted that IDTI reported free cash flow of 30 percent of revenues, which can be further increased due to the possibility of realized synergies from their acquisition of Zentrum Mikroelektronik Dresden AG (ZMDI).
• 2. Margin Expansion: Stephens wrote that IDTI is well-positioned to increase their margins and accelerate growth in the semiconductor market. The acquisition of ZMDI may give Integrated Device Technology the intellectual property to drive innovation while also allowing the company to achieve higher pricing power.

At the time of this publication, Integrated Device Technology was trading down 22.71 percent on the day at $19.71.