Why BofA Double-Upgraded Vishay Intertechnology

Vishay Intertechnology VSH, a manufacturer of discrete semiconductor and passive electronic components, reported Tuesday forecast-beating Q1 results and issued upbeat revenue guidance for Q2.

The Analyst

Reviewing the results, Bank of America Merrill Lynch analyst Ruplu Bhattacharya double-upgraded Vishay from Underperform to Buy and increased his price target from $20 to $24.

The Thesis

Here are a few reasons behind BofA's double-upgrade:

• Component supply will continue to lag demand at least until the end of 2018, Bhattacharya said in a note, despite the capacity additions made.
• The analyst sees continued strong demand from automotive and industrial end markets, which account for about 65 percent of Vishay's revenues.
• The analyst noted strength in bookings, with the book-to-bill ratio at 1.22 for Q1.
• Bhattacharya sees better pricing environment, with the company capable of raising prices on certain components in Q2.
• The analyst expects repatriation of cash, taking advantage of the U.S. tax policy changes, and buybacks in 2H18.
• Further dividend increases are likely, with the management showing proclivity toward it.
• The analyst highlighted the company's large net cash balance, at $6 per share, and attractive valuation.

Price Action

Shares were up 4 percent Wednesday to $21.08.

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