Vishay Intertechnology VSH, a manufacturer of discrete semiconductor and passive electronic components, reported Tuesday forecast-beating Q1 results and issued upbeat revenue guidance for Q2.
The Analyst
Reviewing the results, Bank of America Merrill Lynch analyst Ruplu Bhattacharya double-upgraded Vishay from Underperform to Buy and increased his price target from $20 to $24.
The Thesis
Here are a few reasons behind BofA's double-upgrade:
- Component supply will continue to lag demand at least until the end of 2018, Bhattacharya said in a note, despite the capacity additions made.
- The analyst sees continued strong demand from automotive and industrial end markets, which account for about 65 percent of Vishay's revenues.
- The analyst noted strength in bookings, with the book-to-bill ratio at 1.22 for Q1.
- Bhattacharya sees better pricing environment, with the company capable of raising prices on certain components in Q2.
- The analyst expects repatriation of cash, taking advantage of the U.S. tax policy changes, and buybacks in 2H18.
- Further dividend increases are likely, with the management showing proclivity toward it.
- The analyst highlighted the company's large net cash balance, at $6 per share, and attractive valuation.
Price Action
Shares were up 4 percent Wednesday to $21.08.
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