UPDATE: Nomura Initiates Cavium at Reduce on Share Overvalue

In a report published Tuesday, Nomura analyst Sanjay Chaurasia initiated coverage on Cavium CAVM with a Reduce rating and $28.00 price target.

In the report, Nomura noted, “Cavium trades at a 75% premium to its comp group and is the most expensive name in our coverage. Investors assign a premium owing to Cavium's past revenue performance, positioning at key accounts, and high expectations from Neuron and Project Thunder. However, our analysis suggests that investors may be overvaluing the shares given recent weakness in enterprise security and app acceleration, as well as challenges in 2014 (Broadcom competition and lack of exposure to wireless infrastructure spending. We forecast CY13/CY14 sales/EPS of $296mn/$0.90 and $340mn/$1.15 vs. consensus of $307mn/$0.97 and $372mn/$1.34.”

Cavium closed on Monday at $37.41.