JP Morgan reiterates Overweight, Lowers PT to $37.50 on Cavium

JP Morgan maintains its Overweight rating on Cavium

and lowers its price target to $37.50 from $45 per share as the company lowers 4Q guidance on soft demand. JP Morgan says, "The company indicated that it has under-shipped to demand in 4Q as customers took measures to bring down their inventory levels. We believe that the resultant lean levels in the channel should set the stage for a relatively quick recovery, albeit modest, in 1Q12. With the conclusion of the Cisco hub transition in 4Q, we believe revenue from Cisco should improve sequentially in 1Q. Additionally, we believe that one large storage project (NAS), two security customers, and one macro-basestation program (European) are slated to ramp in 1Q12, and the services business should recover in 1Q12 as well." CAVM closed at $28.48 per share on Tuesday.