Failed Acquisition Could Create Buying Opportunity For Xcerra, DA Davidson Says

A failed acquisition of Xcerra Corporation XCRA by China-based Unic Capital Management could create a buying opportunity for Xcerra as the company’s fundamentals have outpaced its share price, according to analysts at D.A. Davidson

The Analyst

Thomas Diffely of D.A. Davidson upgraded Xcerra from Neutral to Buy, raising the price target from $10.25 to $15.

The Thesis

A year after Unic Capital Management announced its intention to acquire semiconductor company Xcerra, the agreement was terminated after it was unable to get CFIUS approval.

Since the bid, however, shares have traded around the acquisition price while revenues have grown 30 percent, Diffely said in a Monday note. (See the analyst’s track record here)

“Business momentum is very robust”, the analyst said, citing strength across end markets – including automotive and flat panel display – new product momentum and continued growth in Chinese markets as key revenue drivers.

Despite the failed merger, Xcerra and Unic still plan to explore partnership opportunities to facilitate Xcerra’s expansion efforts into China’s high-growth market, according to Diffely.

Price Action

At time of publication, shares of Xcerra traded up 2.9 percent at $10.

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