Market Overview

Morgan Stanley Hikes Atmel Target To $12, Notes 'Strategic Value' In Shares

Related ATML
Microchip Shares Upgraded To Buy Amid Tight Supply In Semis Sector
Top Performing Industries For April 5, 2016
Related AVGO
5 iPhone Suppliers That Could Benefit From Apple's Solid Q3
Slew Of Semiconductor Earnings Could Elevate This ETF
Chip Stocks Slide As Growth Concerns Weigh On Semiconductor Sector (Investor's Business Daily)

In a report published Wednesday, Morgan Stanley analyst Craig Hettenbach maintained an Overweight rating on Atmel Corporation (NASDAQ: ATML), while raising the price target from $9 to $12 to better reflect the company's "strategic value."

"Atmel has reduced costs this year to offset a drop in legacy sales and sensor hub. That said, the company's spending on SG&A is still considerably above peers at 19% of sales (including stock-based comp) vs. 13.5%. As the company's revenue growth improves (with help of lapping legacy sales hit and buoyed by growth in 32-bit MCUs and connectivity), we expect to see attractive operating leverage in the model," analyst Craig Hettenbach wrote.

The recent semi mergers – Avago Technologies Ltd (NASDAQ: AVGO) with LSI Corp (NASDAQ: LSI), TriQuint Semiconductor (NASDAQ: TQNT) with RF Micro Devices, Inc. (NASDAQ: RFMD) and Cypress Semiconductor Corporation (NASDAQ: CY) with Spansion Inc. (NYSE: CODE) – have outlined substantial opex, which makes a case for scale and operational efficiencies.

Hettenbach added, "…any M&A involving Atmel theoretically could accelerate the company's path to higher margins. For instance, we estimate SG&A as a % of sales could be reduced by 550 bp, R&D by 80 bp and GM improved by 250 bp, netting to $0.27 in incremental EPS power in the model. This would take our Non-GAAP EPS estimate of $0.65 in CY16 to $0.92."

"While tempting to move to the sidelines after the sharp rally in ATML, we remain Overweight as increasing M&A in semis sheds favorable light on the company's MCU franchise and IoT assets. We see an attractive skew in potential stock returns, with an upside to downside ratio of 2:1," Hettenbach said.

Latest Ratings for ATML

Jan 2016SunTrust Robinson HumphreyMaintainsNeutral
Jan 2016Raymond JamesDowngradesOutperformMarket Perform
Oct 2015Canaccord Genuity

View More Analyst Ratings for ATML
View the Latest Analyst Ratings

Posted-In: Morgan StanleyAnalyst Color Price Target Reiteration Analyst Ratings


Related Articles (ATML + AVGO)

View Comments and Join the Discussion!

Credit Suisse's Latest Oil Projections

Canaccord: Seadrill Still A Sell And 'In A Hole'