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Mizuho Initiates On Semiconductors; Sector Is Moving

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Mizuho initiated coverage on semiconductor stocks Thursday and was largely bullish.

Analyst Vijay Rakesh thought the industry looked “very healthy” and saw potential in handsets/wireless, the analog semiconductor market and consolidation in memory and touch.

Below are the stocks now covered along with highlights from the research report.

Avago Technologies Ltd (NASDAQ: AVGO) - Buy, $150 price target

“Our PT reflects a multiple of 16.1x our F16E EPS of $9.31. We believe AVGO will continue to drive margins higher as it closes some very accretive acquisitions this year (such as Emulex). We expect near term stock performance to be supported by a strong 4G tailwind into 2H15. We believe AVGO is driving towards approximately $3.4B in FCF for F16E.”

Cypress Semiconductor Corporation (NASDAQ: CY) - Buy, $23 price target

“We believe CY is a changed story now with a revenue focus on Automotive and Industrial, a automotive focused sales force, a potential rebound in SRAM with auto-industrial-wearables-IoT, upside to potential synergies with CODE, an ISSI acquisition and a dividend while you wait.” The price target represented approximately 21.9x the firm’s F16E EPS of $1.05.

Micron Technology, Inc. (NASDAQ: MU) - Buy, $39 price target

“MU should be able to drive almost $3B+ of FCF/year post Capex of ~$4B, which should support significant opportunities for buybacks and shareholder friendly actions. We continue to see a stable DRAM-NAND environment into 2016E driving by an ROI focus and consolidated markets. We believe potentially improving PC-handset builds into 2H15 should be a tailwind and should position MU shares for attractive returns over the next year.”

NXP Semiconductors NV (NASDAQ: NXPI) - Buy, $140 price target

“Our PT represents a P/E multiple of approximately 20.6x on pre-FSL merger EPS of $6.80 for F16E and takes into consideration our expectations for approximately $1.2B of FCF. We believe that multiple product cycles with EMV, NFC, Automotive, synergies, execution and a focus on cash flow position NXPI well into 2016-17E.”

ON Semiconductor Corp (NASDAQ: ON) - Buy, $16 price target

“ON has been a show-me story given the challenges with Sanyo and the PC market, and we believe execution in the Automotive, wireless, and regaining share in the PC computing markets will be key to driving multiples higher. Near term, strong market share in key automotive markets and ramp of new PC Skylake platforms positions well into 2H15.”

SanDisk Corporation (NASDAQ: SNDK) - Neutral, $74 price target

“[E]ven though SNDK is a leader in NAND, it still needs to regain its share loss, its 15nm/3D-NAND lead and revitalize retail. While estimates and expectations have come down substantially, as evidenced by GM consensus for 2015E now down 650bps y/y versus prior flat y/y, we will wait for some confirmation that, 1) 15nm yield issues are behind and 3D-NAND is moving to production and 2) that SNDK can start to regain some of its enterprise-client SSD market share.”

Skyworks Solutions Inc (NASDAQ: SWKS) - Buy, $115 price target

“Our target price reflects our view that a P/E of 19.2x our F16E EPS of $6 is more appropriate because SWKS is projected to grow its EPS by 50% or more y/y in F15E and our F17E EPS is already at $7. Note that our F16E estimates for revenue and EPS are $3.58B and $6 per share, respectively, while our F17E estimates call for revenue of $4.13B and EPS of $7.”

Synaptics, Incorporated (NASDAQ: SYNA) - Buy, $115 price target

“We are initiating SYNA with a Buy-$115 price target, approximately 16.0x F16E EPS of $7.17. Our F16E rev/EPS is at $2.1B/$7.17$ and F17E rev/EPS at $2.2B/$7.99. SYNA is driving FCF of $304M for F16E opening it up to buybacks. Also, given multiple tailwinds with TDDI, FP Biometrics, and a stronger China 4G handset ramp into 2H15, SYNA should be well positioned.”

Texas Instruments Incorporated (NASDAQ: TXN) - Neutral, $57 price target

“TXN is currently trading at approximately 18.4x consensus F16E GAAP EPS of $3.02. Our GAAP F16E rev/EPS is at $14.1B/3.02$ and F17E rev/EPS at $14.9B/$3.36. TXN, as the #1 analog supplier worldwide, is broadly exposed to all markets, with no specific product cycles or drivers, though management has done an excellent job on cash return and cash flow. We are initiating TXN at a Neutral, especially as it trades at ~18.4x F16E consensus EPS at the high end of the semiconductor group and is very broad, supplying globally to virtually market with no specific product cycles.”

Latest Ratings for AVGO

Dec 2017Credit SuisseReinstatesOutperform
Dec 2017KeyBancMaintainsOverweightOverweight
Nov 2017Canaccord GenuityMaintainsBuyBuy

View More Analyst Ratings for AVGO
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Posted-In: mizuho Vijay RakeshAnalyst Color Price Target Initiation Analyst Ratings


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