Five9

: NASDAQ : US$4.45
BUY FINV
Target: US$7.00

COMPANY DESCRIPTION:
Five9 provides cloud-based software solutions for contact
centers. The company’s solutions help call centers
improve business dexterity and reduces the complexity of
contact center operations, while also significantly
reducing costs for the firm. The suite of applications
enables a firm to provide a breadth of call center
functions, including inbound, outbound, and blended
solutions. Five9 was founded in 2001 and is
headquartered in San Ramon.
All amounts in US$ unless otherwise noted.

Technology — Enterprise Software– Software as a Service
A SOLID QUARTER; SUFFICIENTLY INEXPENSIVE TO KEEP A BUY RATING
Investment thesis
Following a June quarter earnings shortfall due to the drop-off of call volumes as
scheduled Obamacare signups ceased, Five9 had something to prove to investors.
The firm took the first step of what we hope is many more consistent “meet or beat”
quarters needed to give investors confidence about future execution. At this
juncture, with a modicum of execution, we believe FIVN shares should provide
above-market returns. We have retained our Buy rating.
 A good bounce-back –upside across the board. FIVN reported Q3/14 revenues
and Adjusted EBITDA of $25.9M and loss of ($5.0M), which were respectively
$1.4M and $2.6M ahead of our estimates. Revenue growth was 23% in the
quarter, despite headwinds of the healthcare segment slowdown noted last
quarter, and FCF losses of ($7.9M) were $4.4M ahead of our estimate.
 Enterprise bookings remain healthy. Five9 had another record bookings
growth quarter; management suggested that Enterprise bookings have
advanced in-step with sale rep hiring that has paced in the 30-40% growth
range (SMB hiring has been closer to 10%). This quarter was highlighted by a
several hundred seat replacement of Avaya/Cisco/Aspect at a large pharma
company, a senior living referral placement service with ~400 agents, and a
nationwide energy company that came in through the Salesforce.com channel.
Dollar-based retention was 97% in the quarter, which is consistent with C2013
levels and down marginally from 98% in Q2/14.
 Outlook: a slight increase,

Q4 should be a bottom in growth. FIVN laps a
difficult Q4 compare against a 2013 period that saw heavy ACA call volumes,
but the December quarter should mark a bottom in growth declines at ~15%,
according to our estimates. We have slightly increased our C2015 projections
and are forecasting 20% revenue growth and more than 500 bps of EBITDA
margin expansion (~19% EBITDA margin losses). We believe there remains an
upward bias to our current growth assumptions.

Applied Micro Circuits

AMCC : NASDAQ : US$6.88 BUY 
Target: US$11.00

Technology — Hardware — Semiconductors and Related Technologies
SOFT NEAR-TERM SERVICE PROVIDER SPENDING IMPACTS CONNECTIVITY SALES; X-GENE AND
HELIX GROWTH OPPORTUNITIES UNAFFECTED
Investment recommendation:

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
recovery:
: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

Valuation:

Our $11 price target (was $12) is based on shares trading at
roughly 14x our F2017 non-GAAP EPS estimate of $0.80.

Broadcom Update :BUY Target Price $46

BRCM : NASDAQ : US$37.33
BUY 
Target: US$46.00

Technology — Hardware — Semiconductors and Related Technologies
STRONG QUARTER DRIVEN BY CONNECTIVITY GROWTH AND RESILIENT SERVICE PROVIDER
RESULTS; ALL EYES TOWARD ANALYST DAY

Investment recommendation:

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.

Investment highlights

 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.

Valuation:

Our $46 price target is based on shares trading at roughly 14x
our 2015 pro forma non-GAAP EPS estimate.

Splunk – Analyst Day Update Target Price $68

SPLK : NASDAQ : US$57.25
BUY 
Target: US$68.00

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.

Analyst day.

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.

CalAmp Update Target price $28

MP : NASDAQ : US$16.50
BUY 
Target: US$28.00

COMPANY DESCRIPTION:
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
Investment recommendation:

 

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.
Investment highlights
 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.
Valuation:

Our $28 price target is based on shares trading at roughly
25x our F2016 pro forma EPS estimate.

Avago Technologies Limited iPhone Upgrade Target price $97

AVGO : NASDAQ : US$83.47
BUY 
Target: US$97.00

COMPANY DESCRIPTION:
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.
Investment highlights
 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
Valuation:

Our $97 price target (was $95) is based on shares trading at
roughly 15x our F2015 pro forma EPS estimate.

Oracle : Analyst Day Update

ORCL : NASDAQ : US$38.27

BUY 
Target: US$48.00

COMPANY DESCRIPTION:
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
Investment thesis
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.
Investment highlights
  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

T-Mobile US BUY Target Price $39

TMUS : NYSE : US$28.49
BUY 
Target: US$39.00

COMPANY DESCRIPTION:
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,
Washington.
All amounts in US$ unless otherwise noted.

Telecommunications
ON THE ROAD WITH MANAGEMENT;
ADD MOMENTUM CONTINUES; BUY
Investment recommendation
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.
Investment highlights
 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

Twitter, Inc. Initial Review BUY

TWTR : NASDAQ
US$52.91 BUY 
Target: 62.00

COMPANY DESCRIPTION:
Twitter is the world’s leading real-time one-to-many
communication platform for discovering and sharing unique
content. With over 270 million global monthly users, Twitter has a
diverse user base including influential individuals such as world
leaders, celebrities, athletes, and leading organizations such as
sports teams, media outlets, and brands. Each Tweet is limited to
140 characters of text, and can conclude photos, videos, and
applications.

Technology — Internet
ENGAGEMENT & MONETIZATION TRUMP USER GROWTH; INITIATING AT BUY
Investment recommendation
We believe Twitter is early in defining what is possible as the world’s
real-time interest sharing platform. The evolution will likely be bumpy,
but the platform should continue to become more mainstream. Slowing
user growth is a challenge, but we believe the company has levers to
pull to fight back. Meanwhile, our positive stance is based largely on the
engagement and monetization momentum we expect over the next few
quarters. We believe this should lead to upward estimate revisions as
Twitter benefits from engagement and monetization groundwork that
has been laid over the past year.
Investment highlights
 Users & engagement may be mixed – MAU growth may not
accelerate, but logged-out users could tilt the discussion favorably;
engagement metrics should rebound in Q3 & Q4.
 However, monetization holds significant upside – Twitter monetizes
at less than half the level of Facebook, but newer ad products
should help it catch up fast.
Valuation
Our $62 price target is based on 45x our 2018 EPS estimate, discounted
to present at a rate of 10%. We note that our estimates do not include
potential dilution from yesterday’s announced convertible debt offering.
On a growth-adjusted EV / Revs basis, TWTR trades at a significant
discount to peers.
Risks
User growth may disappoint, especially in the U.S. where monetization
is highest; platform shift to voyeurs (away from Tweeters) may impact
advertiser interest; new ad products may fail to gain momentum.

Stratasys BUY Target Price $150

SSYS : NASDAQ : US$120.63
BUY 
Target: US$150.00

COMPANY DESCRIPTION:
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
Investment recommendation
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.
Investment highlights
 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%.

Follow

Get every new post delivered to your Inbox.

Join 2,149 other followers