4 Key Factors To Drive Sales At Aquantia

Aquantia Corp AQ, manufacturer of high-speed transceivers, recently IPO-ed, offering 6.82 million shares at $9 each. With the quiet period on the company expiring Tuesday, the sell-side is starting coverage of the company's shares.

The Analyst

Morgan Stanley analyst Joseph Moore initiated coverage of Aquantia with an Overweight rating and a $15 price target.

The Thesis

Aquantia is a leader in higher speed "multigig" Ethernet technology, Moore said in a Tuesday note. (See Moore's track record here.)

As multigig becomes mainstream, Aquantia is expected to grow at over 20 percent for multiple years with significant leverage, Moore said.

Morgan Stanley sees four key top-line drivers for Aquantia: 

• Strong unit growth from 10-gigabit ethernet cards within the data center, primarily through Intel Corporation INTC, which is estimated to account for about 48 percent of revenues in 2018. Transitional ASP headwinds exist in the near term, Moore said. 
• Multigig ethernet NBASE-T solutions for enterprise for communications is likely to be another source of top-line growth, the analyst said. This segment is estimated to account for 39 percent of sales in 2018, with the potential for 25 percent growth.
• Thirdly, the company stands to benefit from multigig ethernet in client PCs and service providers, according to Morgan Stanley. This, according to Morgan Stanley, would contribute to 13 percent of 2018 sales and is in early stages of a ramp.
• Aquantia is expected to penetrate new markets such as automotive for higher-speed data connections in the car, as well as the cloud/hyperscale market, with "Quantumstream" technology.

The Price Action

Aquantia shares gained 5.7 percent on its debut session Nov. 2 and have added about 24 percent since then.

In early trading, shares of Aquantia were up 5.68 percent at $12.47.

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