ADI : NASDAQ : US$49.92
Analog Devices designs, manufactures and markets high performance analog, mixed-signal and digital signal
processing integrated circuits (ICs) used in industrial, communications, computer, and consumer applications
Technology — Hardware — Semiconductor Devices and Related
PRUDENT GUIDANCE AS CUSTOMERS CAUTIOUSLY OPTIMISTIC ON 2014
We maintain a BUY rating for ADI, given lower risk on declining consumer exposure, healthy dividend yield of 3%, and near-term cautious guidance. We continue to view ADI as a core defensive semi holding that is well positioned for communications infrastructure
ADI reported Q3/C13 (Oct) yesterday after the close. Revenues and EPS were $678.1 million and $0.62, compared to consensus estimates of $688.5M and $0.58 and our estimates of $687.5 million and $0.58. Sequential revenue growth in Automotive was partially offset by declines in Consumer coupled with flat sales in Communications and Industrial.
Management guided revenue for CQ4 (Jan) to range from down 10% Q/Q to down 5% Q/Q or $610M to $644M ($627M at the midpoint) and EPS of $0.44-$0.52 ($0.48 at the midpoint). This compared to consensus estimates of $681M/$0.56 and our estimates of $680M/$0.57. Management expects sequential declines in Industrial, Communication, Automotive and Consumer coupled with the divestiture of the consumer microphone business.
ADI’s price target of $55 is 18x our C2014 EPS estimate of $2.39 plus net cash of $12.09/share.
Posted by jackbassteam on December 2, 2013
WDAY : NYSE : US$73.30
Workday provides enterprise-scale, cloud applications that deliver the core functions for global customers to manage the human capital and financial resources of an organization. Solutions include: HCM, Financial Management, Payroll, Time Tracking, Procurement, Employee Expense Management, etc. Workday was founded by the former founders of PeopleSoft in 2005 and is headquartered in Pleasanton, CA.
All amounts in US$ unless otherwise noted.
Technology — Enterprise Software — Software as a Service
ANOTHER EXCEPTIONALLY STRONG QUARTER, LIKELY MORE TO COME. REITERATE BUY, $90 TARGET
While high valuation momentum stocks have taken a breather this quarter as
many investors locked in good YTD performance, Workday, the company,
continues to execute quite well. The firm is a large deal shop, selling to large
firms in big chunks. Our view is that the pivot point for the business will be
several reference customer successes with financials. If that happens around
summer 2014, Workday is very likely to see a cascading list of customers switch
from Oracle and to some degree SAP and perhaps a few Microsoft customers.
With the stock valued at an eye-watering 17x 2014E revenues, Workday will
need to deliver those kind of epic results for the stock to continue working. At
this point, we expect that to happen and for WDAY shares to continue to
bulldoze doubters and short-sellers.
The trend continues: another material upside. Workday reported revenues, calculated billings, and FCF loss of $127.9M (+76% y-o-y), $154.0M (+99%) and ($9.7M), which were respectively $10M, $21M, and $23M better than
our estimates. Subscription revenues grew 82% in the quarter, and non- GAAP EPS loss of ($0.12) was $0.05 better than we expected.
Color from the call. Workday now has more than 550 customers worldwide, with approximately 2/3 currently live on the system. The firm added 10 new Financials customers in the quarter, which was a company record.
Outlook: mid-point Q4 revenues ~$7M ahead of consensus. Rolling forward WDAY’s subscription revenue upside and improved outlook, we have increased our F2015 and F2016 revenue estimates by $30M and $20M respectively, which implies ~50% revenue growth next year. We continue to expect WDAY to show FCF profitability at some point in 2H/F16.
Posted by jackbassteam on November 29, 2013
TTMI : NASDAQ : US$9.00
TTMI is a leading global supplier of printed circuit boards focused on advanced technologies including advanced HDI, rigid flex PCB, and substrate. Headquartered in Costa Mesa, CA, TTMI has approximately 18,000 employees worldwide and is listed on the Nasdaq. TTMI operates 15 specialized factories in the US and China.
Technology — Hardware — Semiconductor Devices and Related
Management continues to expect higher utilization rates to drive near term improvements to gross margin, while divestiture and plant closure should structurally improve margins for the long term. For Q1, we expect upside to estimates on iPad Air strength and a conservative reserve, while Networking weakness was captured in guidance despite recent concerns stemming from Cisco’s outlook. We are reiterating a BUY rating and $11 price target.
Strong iPad Air boosting PCB suppliers
For Q4, supply chain conversations indicate strong demand for iPad Air is resulting in upward revisions to forecasts for PCB suppliers. Further, we believe production for the retina version of the iPad Mini is likely to pick up in Q1, following constrained production levels in Q4, potentially offsetting some of TTMI’s normal negative Q1 seasonality.
Cautious Cisco commentary not incremental to TTMI’s outlook
We believe TTMI captured Networking weakness in its Q4 guidance. The company has very little exposure to set top boxes and is still seeing good demand in the high end of networking (advanced routers and data center). TTMI doesn’t participate in federal so it is not seeing any impact from the government shutdown, while the guide from the earnings call captured a softer Asia wireless infrastructure, with Networking overall guided down for Q4.
Inventory reserves look conservative
We believe upside to margin expectations is possible if the $3M of the warranty claim taken as reserves against future claims turns out to be high. Most of the products these boards shipped into were sold last
Posted by jackbassteam on November 26, 2013
ATML : NASDAQ : US$6.58
Atmel Corporation designs, develops, manufactures and sells a broad range of advanced logic, microcontroller,
nonvolatile memory, radio frequency (RF), and capacitive touch solutions. The company’s products are designed for
use in the automotive, communications, computing/storage/printing, consumer electronics , industrial/military/aerospace, and security end markets
REITERATE BUY ON MARGIN EXPANSION
We reiterate a BUY ahead of what we believe is likely to be strong gross margin expansion. Q4 gross margins are guided up Q/Q due to higher utilization rates and continued cost reduction efforts. Management expects gross margins to continue to improve in 2014 as utilization improves; they control operating costs and use up the higher cost inventory from the take or pay foundry agreements. We are slightly adjusting our estimates and maintain a $9 target.
ATML reported Q3/13A (Sep) after the close. Revenues and non- GAAP EPS were $356.3 million (+2% Q/Q) and $0.09, compared to our inline estimates of $357 million and $0.09. Revenue was slightly below the mid-point of guidance ($348M to $365M)
Management guided revenue to be in the range of $340 million to $364 million ($357 million mid-point), compared to consensus estimate of $365 million and our estimate of $359 million. Management expects MCU to be flat Q/Q with maxTouch down low single digits and core MCU up single digits, ASIC to be down low double digits, Memory down mid to high single digits and RF & Automotive up low single digits.
Atmel’s board authorized an additional $300M to the existing $700M stock repurchase program, of which ATML has repurchased approximately $636.3M (72.1M shares) of its common stock
Posted by jackbassteam on November 4, 2013
NOW : NYSE : US$52.96
ServiceNow is a leading provider of cloud-based services that automate enterprise IT operations — this includes a suite of
applications built on the firm’s proprietary platform that automates workflow and provides integration between related
business processes. ServiceNow was founded in 2004, is headquartered in San Diego, CA and has been public since June 2012
Technology — Enterprise Software — Infrastructure
ANOTHER EXCELLENT QUARTER AS MOMENTUM CONTINUES; INCREASING PRICE TARGET TO $60
ServiceNow, in our opinion, has reached escape velocity in terms of marketplace momentum. What that means for investors is that it is very likely that the company will continue to scale rapidly. If so, this puts the bias in terms of estimate revisions to the upside, which in turn means a slower-than-one might- expect decline in the EV/revenue multiple, and that translates into
continued superior stock price returns. That’s a BUY to us, and that’s what we’re recommending investors do when it comes to NOW.
Upside revenue and EPS. ServiceNow reported strong Q3/13 results with revenue and non-GAAP EPS of $111.3M (+73% y-o-y) and $0.01, which were respectively $5.8M and $0.03 ahead of our estimates. The firm generated FCF of $3.9M compared to our $1.8M estimate and calculated billings of $127.0M (+56% y-o-y) were $3.7M ahead of our forecast.
Customer metrics. Average annual revenue per customer was $219k, up 21% y-o-y driven by larger initial deals and user growth within the customer base. NOW added 122 net new customers in Q3 (down sequentially, but the focus has been on larger deals), bringing the firm’s total to 1,900, including 18% of the Global 2,000. Subscription revenue retention was 97% and the firm added three new customers with ACV
Outlook: Q4 guided nicely ahead of consensus. Mid-point revenue guidance for Q4 was roughly $4M ahead of estimates and management expects roughly breakeven operating margins (in-line with consensus). We have increased our C2014 revenue estimate by $20M to $610M, which would be 45% revenue growth, and are assuming ~3.7% operating margins
Posted by jackbassteam on October 24, 2013
CAMP : NASDAQ : US$18.69
CalAmp supplies tightly integrated M2M hardware with its COLT M2M Application Enablement Platform (AEP) cloud to add cellular and GPS connectivity solutions into several M2M verticals including: fleet management, asset/trailer tracking, vehicle finance/recovery/remote start, rail, and smart energy. In its legacy business, CalAmp supplies outdoor reception/amplification and indoor network products for DBS satellite TV applications
All amounts in US$ unless otherwise noted.
Technology — Communications Technology — Wireless Equipment
STRONG RESULTS AND GUIDANCE; WELL POSITIONED WITH SEVERAL LONG-TERM GROWTH DRIVERS
Investment recommendation: CalAmp delivered strong results with Q2/F2014 pro forma EPS of $0.19 well above our $0.16 estimate. We believe the Wireless Matrix acquisition combined with the strong pipeline for CalAmp’s higher-margin Wireless DataCom business position CalAmp to grow faster than our 16% M2M hardware market revenue CAGR forecast. In fact, we believe CalAmp’s Wireless DataCom business is well positioned to drive re-accelerating 2H/F2014 and F2015 sales and earnings growth driven by new usage-based auto insurance contracts ramping in 2H/F2014, growing international sales, ramping sales from new deals with Caterpillar starting in Q1/F2015 and Pepco Holdings in 2H/F2014, and anticipated steady growth of higher-margin Wireless Matrix sales. We maintain our BUY rating and increase our price target to $30. CalAmp remains our top small-cap pick.
CalAmp’s higher-margin Wireless DataCom division’s Q2/F2014 sales of $47.2M grew an impressive 38% year-over-year including a full quarter of Wireless Matrix sales. Satellite division sales of $11.6M declined slightly sequentially from $12.9M in Q4/F2013, but gross margin of 19.6% was above our 18% estimate driven by a favorable product mix.
Consistent with our positive investment thesis that several growth drivers would drive improving 2H/F2104 results, CalAmp’s Q3/F2014 guidance for sales of $61M at the mid-point was above our $59.8M estimate and pro-forma EPS guidance of $0.19-0.23 was in line with our $0.21 estimate.
Given the strong Q2/F2014 results and our belief multiple long-term growth drivers remain intact, we increase our F2014 pro-forma EPS estimate from $0.78 to $0.81, F2015 from $1.02 to $1.04, and introduce our F2016 estimate of $1.20.
Valuation: Our $30 price target is based on shares trading at roughly 25x our F2016 pro forma EPS estimate.
Posted by jackbassteam on October 3, 2013
Image via CrunchBase
AKAM : NASDAQ : US$44.81
Akamai provides content delivery and cloud infrastructure services for accelerating and improving the delivery of content and applications over the Internet, ranging from live and on-demand streaming videos to conventional web content, to c-commerce tools. The company is headquartered in Cambridge, Massachusetts
We maintain our BUY rating and $51 price target ahead of Akamai’s Q2/13 report as we believe that fundamentals remain strong and that investors will be rewarded for their patience as the company invests for the next stage of growth. With strong traffic growth, improving cost structure, multiple sources of emerging growth areas and stabilizing pricing trends for traditional CDN business, we are confident that Akamai can maintain attractive growth rates and margin profile despite the incremental investments. We believe the bar has been set low enough for the company to again outperform investor expectations.
Under-promise, over-deliver likely the ongoing theme – Given the greatly lowered expectations for the investment phase, but the significant outperformance in Q1/13 results, we would not be surprised if the new CEO follows a conservative strategy to under-promise and over-deliver on guidance. A few more quarters of similar results will likely garner investors’ confidence in assigning higher valuation to its shares.
Manage both growth and investments – Unlike other companies that deploy radical changes to growth strategy in transitions, we believe Akamai will likely take a more measured approach in balancing its current growth with investments for future opportunities. As such, we believe the risks of volatile results will be mitigated as strong growth and improving margins will help offset some of the incremental investments.
Improving fundamentals – Our recent research indicates that internet traffic remains strong in Q2/13 and that the decline rate in volume-driven CDN pricing stabilized at roughly -20%. As the demand for online security and mobile services remains strong and as the company’s cost structure continues to improve, both revenue growth and margin will likely benefit, in our view.
Posted by jackbassteam on July 23, 2013
Image via CrunchBase
RAX : NYSE : US$39.30
A provider of managed hosting and cloud computing services, Rackspace provides businesses with the infrastructure to house their data (web sites and applications), and with the customer support for their IT services need. Primarily focused on small businesses, Rackspace Hosting is known for its unique customer service experience known as “Fanatical Support”. The company is headquartered in San Antonio, Texas.
DARK CLOUDS REMAIN ON THE HORIZON; REDUCING PT TO $37
Despite recent estimate cuts, we believe additional downside risks remain given the increasing level of competition and the operating distraction we believe is resulting from the OpenStack transition. We believe aggressive competitive pricing pressures and continued momentum from competitors’ cloud eco-systems will likely make the OpenStack transition increasingly difficult. We are lowering our target multiple from 10x to 9x and our price target from $40 to $37accordingly.
Dedicated business likely further slows – We believe the increasing adoption of IT outsourcing to the public cloud will likely shift more
incremental demand away from traditional dedicated hosting services. Premium pricing, product cycle transition and continued sales force distraction due to OpenStack will likely make it difficult for Rackspace to regain momentum in its core dedicated business.
Uphill battle for OpenStack – As Amazon AWS, Microsoft Azure, VMWare and Google further penetrate respective cloud ecosystems, we believe it will be increasingly challenging for OpenStack to gain traction in the increasingly competitive market. The aggressive pricing strategy by AWS and matched by others will likely continue to create significant headwinds for companies like Rackspace.
Still too early for bottom fishing – Despite the over 50% drop in share price from its recent peak, we believe it is still too early for bottom fishing given the continued downside risk and with its shares still valued at 9.7x 2014E EBITDA.
Posted by jackbassteam on May 30, 2013
Image via CrunchBase
Microsoft (MSFT : NASDAQ : US$28.79)
Dell (DELL : NASDAQ : US$14.10)
Hewlett-Packard (HPQ : NYSE : US$20.90)
According to IDC, personal computer sales fell 14% this quarter, on a year-over-year-basis, the largest decline
since IDC started tracking sales in 1994.
The research firm had forecast a 7.7% drop in the quarter. “At this point, unfortunately, it seems clear that the Windows 8 launch not only failed to provide a positive boost to the PC market, but appears to have slowed the market,” said Bob O’Donnell, IDC Program Vice President, Clients and Displays in IDC’s press release.
He added, ”While some consumers appreciate the new form factors and touch capabilities of Windows 8, the radical changes to the UI, removal of the familiar Start button, and the costs associated with touch have made PCs a less attractive alternative to dedicated tablets and other competitive devices. Microsoft will have to make some very tough decisions moving forward if it wants to help reinvigorate the PC market. Separately, the Wall Street Journal reported that Microsoft is developing a smaller, 7-inch version of its Surface tablet, according to sources close to the matter.
One person familiar with Microsoft’s product plans said the 7-inch tablets weren’t part of the company’s strategy last year, but Microsoft executives realized they needed a response to the rapidly growing popularity of smaller tablets like Google’s (GOOG) 7-inch Nexus, which was announced last summer, and the 7.9-inch iPad Mini introduced by Apple (AAPL) last October.
Posted by jackbassteam on April 15, 2013