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Inphi Corp.'s Lower Q1 Guidance Triggers BofA Downgrade

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Inphi Corp.'s Lower Q1 Guidance Triggers BofA Downgrade
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Inphi Corporation (NYSE: IPHI) reported fourth-quarter results Wednesday that were largely in-line with the Wall Street consensus, but guided a first-quarter outlook that fell short of expectations. 

The Analyst

Bank Of America Merrill Lynch's Vivek Arya downgraded Inphi Corp. from Neutral to Underperform and decreased the price target from $40 to $21.

The Thesis

Inphi Corp. reported Q4 sales inline with the expectations and beat EPS estimates by 3 cents per share. This wasn't enough to soften the impact of significantly lower Q1 sales guidance. Inphi expects 30-percent lower sales quarter-over-quarter and 36-percent lower sales year-over-year — 21-percent below expectations, Arya said in a note.

BofA's concerns include persistent inventory issues, a lack of concrete orders from customers, lower demand in China, deteriorating prices and the unexpected loss of a second customer for its Colorz data center product.

Given the uncertainty of the company's earnings, Arya said he decided to switch to an EV/S methodology, and his new price target is based on 3 times EV/S. The analyst said he has a downward bias to the company's gross margin; it was guided down for Q1, and Arya said he sees more room for a downside surprise. 

The Price Action

Inphi shares were down 15.55 percent at $25.09 at the close Thursday. 

Related Links: 

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Morgan Stanley's Conviction In Upside For Inphi Limited 

Latest Ratings for IPHI

DateFirmActionFromTo
Jan 2019CitigroupInitiates Coverage OnBuy
Nov 2018JP MorganMaintainsOverweightOverweight
Oct 2018BarclaysMaintainsOverweightOverweight

View More Analyst Ratings for IPHI
View the Latest Analyst Ratings

Posted-In: Bank of America Merrill Lynch Data Center Vivek AryaAnalyst Color Downgrades Price Target Analyst Ratings

 

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