AMCC : NASDAQ : US$6.88 BUY
Technology — Hardware — Semiconductors and Related Technologies
SOFT NEAR-TERM SERVICE PROVIDER SPENDING IMPACTS CONNECTIVITY SALES; X-GENE AND
HELIX GROWTH OPPORTUNITIES UNAFFECTED
We maintain our belief APM is well
positioned for long-term growth and significant operating leverage as the
first vendor with 64-bit ARM chips designed specifically for the $13B+
server market. While our legacy business estimates were Street-low into
results, lower Connectivity sales in the face of softer service provider capital
spending levels were even below our estimates. We remain cautious on
near-term legacy business trends, but continue to believe in the long-term
ARM server opportunity and HeliX design wins provide a path for embedded
sales recovery in C2016. We reiterate our BUY rating, PT to $11 from $12.
Investment hInvestment highlights
Results/guidance recap: APM report Q2/F2015 revenue of $41.0M and
non-GAAP LPS of $(0.06) or below our estimates of $42.1M/$(0.04) due
to disappointing Connectivity sales of $24.9M, down 20% Q/Q. While we
had anticipated softer Connectivity sales for the next few quarters with
softer service provider spending (particularly in North America), SeptQ
sales and DecQ guidance were below our expectations. With 4-5 month
lead times typical in these markets, we believe a book-to-bill of 1.2x in
the quarter indicates DecQ Connectivity sales have bottomed
X-Gene ARM server opportunity unaffected
HeliX embedded design wins provide path for C2016 base business
:APM recently announced a family of HeliX embedded ARMv8
chips targeted at Networking, Storage, Industrial, and Imaging markets.
We believe tier-1 design wins have already been secured, and we
anticipate first material sales in Q1/C’16 should begin to regrow APM’s
embedded processor business back toward $25M/quarter run rates
Our $11 price target (was $12) is based on shares trading at
roughly 14x our F2017 non-GAAP EPS estimate of $0.80.
Posted by jackbassteam on October 29, 2014
BRCM : NASDAQ : US$37.33
Technology — Hardware — Semiconductors and Related Technologies
STRONG QUARTER DRIVEN BY CONNECTIVITY GROWTH AND RESILIENT SERVICE PROVIDER
RESULTS; ALL EYES TOWARD ANALYST DAY
Broadcom posted strong Q3/14 results with sales above our estimate driven by strong 20% Q/Q growth in Connectivity
sales with the inclusion of new 802.11ac WiFi solutions in key smartphone
launches including iPhone 6. Further, service provider sales were down only
roughly 2.5% Q/Q, better than feared given recent market commentary.
Finally, faster operating expense reductions post the decision to shut down
the cellular baseband business helped drive a solid beat on the bottom line.
We believe the stock will likely rebound post the recent sell-off in the group
and all eyes will then turn to Broadcom’s December 9 analyst day for future
growth strategy and increased capital returns commentary. We reiterate our
BUY rating and raise our target to $46 from $45 on increased estimates.
Q3/14 revenue of $2.26B was above our and consensus estimates of
$2.18B (see Figure 1) driven by a surprising rebound in baseband sales,
20% Q/Q Connectivity growth, and only a roughly 2.5% Q/Q service
provider sales decline in ING versus. Non-GAAP gross margin of 54.3%
was a bit below 55% guidance midpoint, but was very strong
considering the unexpected increase in baseband sales (roughly a 170
basis point gross margin headwind in total) and a greater mix of
Connectivity sales to large customers. We believe additional upside
exists to gross margin into 2015 for Q4/14 guidance of 55%. Non-GAAP
operating expenses were $10M below our estimate at $646M, and
management expects another $50M reduction in Q4/14 as baseband
costs continue to be wound down. Non-GAAP EPS was $0.91, $0.07
above our estimates and consensus.
Given these significant cost savings of the baseband exit, we believe
gross margin can remain in the mid-to-high 50s and operating margin
will expand into the mid-to-high-20s during 2015. We maintain our
belief Broadcom’s core Home and Infrastructure businesses are well
positioned for solid growth and will benefit further from increased
management attention and investment post the baseband exit.
Our $46 price target is based on shares trading at roughly 14x
our 2015 pro forma non-GAAP EPS estimate.
Posted by jackbassteam on October 22, 2014
SPLK : NASDAQ : US$57.25
Technology — Enterprise Software — Infrastructure
ANALYST DAY TAKEAWAYS: STILL PLENTY OF ROOM FOR GROWTH
With the 26% increase in SPLK shares since the firm last reported results at the end
of August, the stock is again sporting a top decile valuation, at more than 11x
C2015E EV/revenue. While this may be hard for some to stomach in today’s skittish
tape, we continue to believe that continually increasing use cases will drive capacity
expansion (and revenue growth) beyond what current estimates capture. An upside
estimate bias combined with the scarcity value of being the only public company, big
data pure play on the “Internet of Things” warrants a premium valuation. Our call on
SPLK continues to be that we anticipate revenue growth to more than outpace a
gradual multiple compression so that investors can expect 15%+ gains over the next
9-12 months. Reiterate BUY.
On Tuesday SPLK hosted an analyst day in conjunction with its 5th
Annual Worldwide User’s Conference in Las Vegas.
Splunk Enterprise 6.2. From a product standpoint, news centered on the firm’s
end of October release of the latest version of its machine data analytics
platform. Highlights include: enhanced event pattern detection to make the
software more intuitive to less technical users, simplified onboarding of any
machine data, and efforts aimed at reducing total cost of ownership through
increasing concurrent user capacity and eliminating shared storage
requirements (reducing underlying infrastructure investments).
Evolving to a segment-focused sales model. This area of continued investment
will focus on augmenting normal field reps with subject matter and industry
vertical experts – not only will this help to drive new customer adoption, but it
should also increase horizontal expansion (i.e. new use cases) within the firm’s
nearly 8,000 customer installed base.
What’s it mean for the numbers?
An increase in ratable bookings, while tough
to predict in the near-term (~25-35% of deals, up from 10-20% at the time of
IPO), will drive improved revenue visibility over time. Longer-term, SPLK
continues to manage the business towards a 20-25% operating margin, the
timing of which will be determined by the pace of top line growth.
Posted by jackbassteam on October 8, 2014
MP : NASDAQ : US$16.50
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 application
Technology — Communications Technology — Wireless Equipment
SOLID Q2/F’15 RESULTS AND H2/F’15 GUIDANCE
CalAmp reported solid Q2/F2015 results, with
sales consistent with and pro forma EPS above our estimates. Consistent
with our expectations for stronger H2/F2015 Wireless DatacCom sales
versus H1/F2015 levels, CalAmp issued H2/F2015 guidance basically
consistent with our estimates. We believe CalAmp’s Wireless DataCom
business is well positioned to drive strong H2/F2015 and F2016 sales and
earnings growth trends driven by strong initial sales to Caterpillar that
started in September, growing insurance telematics opportunities, improving
international sales, increasing product offerings and customers in the
pipeline, and anticipated steady growth of higher-margin recurring revenue
sales. We maintain our BUY rating and $28 price target.
Q2/F’15 sales of $59.2M were consistent with our $59.2M estimate, with
CalAmp reporting Wireless DataCom sales of $50.2M and Satellite
division sales of $9.0M versus our $50.9M/$8.4M estimates. Stronger
gross margin and slightly lower operating expenses resulted in pro
forma EPS of $0.21 versus our $0.18 estimate.
Q3/F’15 guidance of $63M in revenue and pro forma EPS of $0.23 at the
range midpoints were slightly below our $65.7M/ $0.25 estimates.
However, full-year F2015 were in line with our estimates. Consistent
with our expectations for stronger overall H2/F’15 trends due to strong
initial sales to Caterpillar ($10M+ in H2/F’15E), solid core MRM trends
with international growth and steady UBI hardware sales, management
guided F2015 sales of $253M and pro forma EPS of $0.91 at the range
mid-points. This guidance was basically consistent with our
$256M/$0.91 estimate. We anticipate the strong H2/F’15 trends should
create a foundation to drive steady long-term sales and earnings growth
in F2016 and beyond.
With H2/F2015 guidance basically consistent with our estimates, we
maintain our F2015 pro-forma EPS estimate of $0.91 and slightly
increase our F2016 pro forma EPS estimate from $1.11 to $1.12.
Our $28 price target is based on shares trading at roughly
25x our F2016 pro forma EPS estimate.
Posted by jackbassteam on October 7, 2014
AVGO : NASDAQ : US$83.47
Avago Technologies Limited is a designer, developer and
global supplier of analog semiconductor devices. Avago
offers products in three primary target markets: wireless
communications, wired infrastructure, and industrial and
automotive electronics. Applications for Avago products
include smartphones, connected tablets, consumer
appliances, data networking and telecom equipment, and
enterprise storage and servers.
Technology — Communications Technology — Semiconductors
RAISING ESTIMATES BASED ON STRONG IPHONE 6 CONTENT SHARE AND INCREASED IPHONE 6 ESTIMATES
Investment recommendation: Based on our analysis, industry
conversations, and recent iPhone 6 teardown reports, we believe Avago has
roughly doubled its dollar content in the recently launched iPhone 6/6 Plus
smartphones versus the iPhone 5s/5c models and has the highest RF dollar
content share among the RF suppliers. With our recent surveys indicating
extremely strong demand for the new iPhone 6 products, we anticipate very
strong Q4/14 iPhone sales and high-end smartphone market share gains for
Apple versus high-tier Android OEMs, particularly Samsung. Given Avago’s
strong dollar content in the new iPhones and our recently raised iPhone
estimates, we are raising our Avago estimates. We reiterate our BUY rating
and raise our PT to $97.
Our recent surveys and analysis indicate very strong iPhone 6 demand,
and we anticipate a record iPhone 6 upgrade cycle. Please see our
separate Apple note, published Sept. 22, titled “Monthly surveys
indicate record iPhone 6 upgrade cycle, strong market share gains,” for
our updated iPhone estimates.
We estimate the RF front-end content in the iPhone 6/6 Plus increased
to roughly $15.25-15.50 per device versus $11.25-11.50 in the iPhone
5s/5c models due to increased LTE band support and features such as
envelope tracking and carrier aggregation. Due to the increased
number of higher-frequency bands supported that require FBAR filters,
we believe Avago increased its RF dollar content to roughly $6/iPhone 6
models versus roughly $3 in the iPhone 5s/5c.
While we believe Avago has growing dollar content in other flagship
Android smartphones such as Galaxy Note 4, Avago has stronger dollar
content share in the iPhone 6 devices given Android smartphones tend
to support more regional LTE SKUs. Therefore, we believe Avago will
benefit from strong iPhone 6/6 Plus sales despite our recently lowered
Android estimates due to share losses to the iPhone 6 products.
Given these trends, we raise our F2014/15 Wireless business sales
estimates, resulting in our F2014/15 pro forma EPS estimates
increasing from $4.63/$6.35 to $4.65/$6.45
Our $97 price target (was $95) is based on shares trading at
roughly 15x our F2015 pro forma EPS estimate.
Posted by jackbassteam on October 6, 2014
ORCL : NASDAQ : US$38.27
Oracle develops, licenses and services database and
middleware software, applications software, and
hardware systems worldwide. The firm is the world’s
second largest application software firm, and a top five
systems vendor. Oracle was founded in 1977 and is
headquartered in Redwood City, CA.
All amounts in US$ unless otherwise noted.
Technology — Enterprise Software — Infrastructure
A MYTHBUSTER-THEMED ORACLE ANALYST DAY
Our view on Oracle is simple: the company is not as troubled as the stock’s
valuation reflects. There are enough good things – new products, new
markets, new business models – coming down the pipe that we expect ORCL
shares to see a 1-2 multiple point expansion over the next year, which implies
10-20% upside from here. For a large cap stock, that is more than sufficient to
justify our BUY rating.
Oracle’s analyst day as part of its OpenWorld
User Conference. A couple hundred financial types were in the room.
Incremental takeaways. The firm outlined and explained multiple
attributes that are better than consensus opinion – in other words, Oracle
was busting myths. The firm’s near-term ARR cloud pipeline tops $2
billion and is growing 30%+, meaningful upgrades in the firm’s core,
highly profitable database are on tap, and financial engineering in terms
of share count repurchases will remain material and fairly aggressive.
Why the stock works. One way to make money in stocks is to buy shares
of companies on which investors soften too bearish opinions. This is the
crux of our BUY rating on ORCL. Yes, Oracle has vibrant competition, but
the firm simply is not as endangered, at least in the next year or so, as
hyperventilating cloud competitors assert. We have seen meaningful
rallies for Microsoft and HP as investor perception went from dire to at
least neutral. We believe a similar transformation awaits ORCL shares.
Valuation and price target
Our unchanged $48 price target is based on a 13x multiple applied to our
F2016 non-GAAP EPS estimate of $3.26 plus approximately $5.00 in
prospective net cash per share
Posted by jackbassteam on October 3, 2014
TMUS : NYSE : US$28.49
The fourth largest wireless carrier in the US by
subscribers, T-Mobile US was established with the merger
between MetroPCS and T-Mobile USA, formerly a unit of
Deutsche Telekom. The company is majority owned by
Deutsche Telekom and is headquartered in Bellevue,
All amounts in US$ unless otherwise noted.
ON THE ROAD WITH MANAGEMENT;
ADD MOMENTUM CONTINUES; BUY
Our two-day non-deal roadshow in the Midwest served to solidify our
view that the company’s dynamic, aggressive pricing strategy is
continuing to drive postpaid add share. While the focus on the margin
seems to have shifted from lowering prices as part of the Un-carrier
strategy to offering more data at the same prices with targeted
promotional activity highlighting network quality, strong momentum
continues as evidenced by management’s disclosure earlier this month
of 552k postpaid and 208k prepaid net adds in August alone. These
results suggest upside to our Q3/14 estimates of 580k and 106k,
respectively. Management also discussed a number of key industry
issues, including upcoming spectrum auctions, competitors’ network
build plans and the potential for large-scale M&A. Maintain BUY.
More targeted promotions continues to lead the industry in terms of aggressive pricing, the
magnitude of disruption has been lower. Recent promotional activity
– i.e., four lines for $100, slated to end this month – appears to be
more limited, with a longer-term intent to offer more data and
ancillary services at comparable price points.
Network goals – The company has been accumulating low-band
spectrum throughout the year in the secondary market and
discussed the possibility of expanding coverage to 300M POPs. Such
a move, however, would likely be contingent on the results of the
upcoming AWS and broadcast auctions.
Maintain BUY, $39 target – Management’s aggressive strategy is
enabling market share gains and, though we believe the absence of
a credible, immediate-term acquirer eliminates some M&A upside
potential, we continue to recommend T-Mobile US
Posted by jackbassteam on September 28, 2014
SSYS : NASDAQ : US$120.63
Stratasys Ltd. is a global provider of 3D printing solutions,
including a wide range of 3D printers, consumable print
materials and services. Stratsys Ltd. was formed with the
merger of Stratsys and Objet in a stock-for-stock merger
completed in December 2012. The combined company
has an impressive portfolio of 3D printing and direct
digital manufacturing solutions.
All amounts in US$ unless otherwise noted.
Transportation and Industrials — Manufacturing Technology
ANALYST DAY EFFECTIVELY COMMUNICATES MANAGEMENT’S STRATEGIC VISION
SSYS management laid out a solid case for driving strong top line organic
growth (25%+ over next 3-5 years) during Monday’s analyst day in New
York. Momentum remains healthy at the high end for Fortus and
Connex3, which is likely to yield strong follow-through materials sales
and gross profit, while new product introductions are continuing at a
rapid pace (41 in 2014) and should keep the channel invigorated. The
presentations also clearly illustrated compelling synergies between a
recently expanded service bureau capability (Solid Concepts and Harvest
acquisitions) and strategic sales efforts for hardware and materials that
address the desire of large global customers to explore the full range of
3D printing’s ROI potential in their manufacturing and design activities.
We are reiterating a BUY rating and $150 price target, and see EuroMold
(late November) as a looming positive catalyst for SSYS based on 10+
additional new product introductions to be made during the show.
SSYS at the analyst day announced the launch of two new Connex1
and Connex2 printers at lower price points to complement the
Connex3 printer that has strong customer traction. The new printers
add increased functionality and share a common family platform with
Connex3 and replace the Eden Series of Connex printers. Additionally
SSYS announced the launch of the new FDM ASA outdoor material
offering targeted at automotive applications. Management expects to
announce more than 10 new products at EuroMold this November.
Stratasys reiterated its 2014 guidance for revenue of $750-770M
compared to our estimate of $759.6M and consensus of $758.8M and
EPS of $2.25-2.35 compared to our in-line estimate of $2.31.
Management reiterated a long term revenue target of 25%+ growth
with long term operating margins of 18%-23%.
Posted by jackbassteam on September 10, 2014
WDAY : NYSE : US$90.30
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.
Technology — Enterprise Software — Software as a Service
THE MOMENTUM CONTINUES: ANOTHER EXCELLENT QUARTER
The obvious comment is that Workday’s EV/revenue multiple is high. What is less
obvious is that the likely decay of this multiple to a more reasonable, 6-8x forward
estimates could take longer to reach than expected. The combination of marquee
customer wins in HCM (like BofA in the quarter), new referenceable logos for
Financials, and success with the firm’s Analytics add-on could keep revenue growth
faster for longer than expected. Our only small nit is that we would like to see a
continuation of profit upsides from this management team so that they can
demonstrate that they deserve to be compared to Salesforce.com, which was more
profitable at WDAY’s current revenue level. We believe investors should own at least
a partial position in this industry-altering firm in any growth-oriented portfolio.
Another meaningful upside. Workday reported Q2/15 revenues, calculated
billings, and FCF loss of $186.8M (+74% y-o-y), $206.3M (+56% y-o-y) and
$37.4M, which were respectively $9.8M, $21.3M, and $35.0M ahead of our
estimates. Subscription revenues grew 77% y-o-y, and non-GAAP EPS loss of
($0.11) was $0.04 better than our forecast.
Color from the call. After bringing HP, the firm’s largest customer to date, live in
Q1, WDAY announced that it signed an HCM deal with Bank of America and its
300k employees in Q2, now making that firm its largest customer. WDAY ended
the quarter with >700 HCM customers and nearly 100 Financials customers.
While the firm saw strength across the board, management noted particularly
strong results in Europe and within Financial Services, including two Fortune
500 deals in that sector. Lastly, WDAY’s services ecosystem continues to grow
nicely, with both HP and CSC announcing plans to build deployment practices.
Guidance increased again. WDAY guided Q3/15 estimates above the Street and
increased F2015 revenue targets by ~$25M. F2015 bookings growth is expected
to be roughly 60% and non-GAAP operating losses were trimmed to the high
single digits. Longer-term, management did note that the firm does not expect to
be non-GAAP profitable in F2016, which shouldn’t come as a surprise.
Posted by jackbassteam on August 28, 2014