Apple iPhone 3GS, Motorola Milestone and LG GW60 (Photo credit: Wikipedia)
RFMD : NASDAQ : US$5.20
RF Micro Devices is a leading supplier of power amplifiers, front end modules and other RF components for mobile devices (handsets, smartphones, tablets) and communications infrastructure.
FLAGSHIP SMARTPHONE PLATFORMS AND LEVERAGE FROM COST SAVINGS INITIATIVES
We believe RFMD is well positioned to deliver strong growth in C2013/14 driven by share gains in flagship LTE smartphone platforms including Samsung, Nokia, BlackBerry, and Apple. Further, given RFMD’s strong position in mid- and low-tier smartphones driven by its broad GaAs- and CMOS-based portfolio, we believe RFMD is well positioned to benefit from elastic smartphone demand in emerging markets including China.
Overall, we believe RFMD should grow faster than the RFIC market in F2014/15 and reduced costs due to facilities management, improved fab capacity utilization, and redesigned CMOS products should drive margin leverage. We reiterate our BUY rating and $7.50 price target.
Given RFMD’s improved LTE portfolio including Phenom PAs and antenna switching solutions, we believe RFMD is well positioned to gain content share in flagship smartphone platforms including the Samsung Galaxy S4, Nokia Lumia and Asha series, BlackBerry Z10 and Q10, and potentially Apple’s next generation iPhone programs.
In addition, we believe RFMD is less vulnerable to softer near-term iPhone sales where RFMD’s competitors have greater exposure.
Further, our market analysis indicates ramping sales of affordable 3G smartphones from Chinese OEMs powered by Qualcomm QRD, MediaTek, and Spreadtrum turnkey solutions, and we believe RFMD has strong share, particularly in TD-SCDMA smartphones.
Finally, we believe the closure/sale of RFMD’s UK switch facility, increased utilization at the Greensboro, NC production facility, and the transition Amalfi CMOS products to lower-cost designs should expand gross margin and drive leverage from increased sales. In fact, we believe management’s target of 300-400bps gross margin improvement exiting F2014 is achievable given these initiatives.
We maintain our above-consensus F2014/15 pro forma EPS estimates of $0.43 and $0.68, respectively.
Our $7.50 price target is based on shares trading at roughly 11x our F2015 pro forma EPS estimate.
Posted by jackbassteam on June 10, 2013
Image via CrunchBase
TGO : TSX : C$7.41
TeraGo provides carrier-grade wireless broadband and local voice services to small and medium-sized businesses. In addition, the company provides wireless backhaul services to Canadian wireless carriers. TeraGo’s national network covers 46 major markets across Canada and currently serves more than 6,500 customers locations. The company recently acquired Data Centers Canada, adding co-location services to its product offering.
ACCRETION FROM DATA CENTRE ACQUISITION
TeraGo closes the acquisition of Data Centers Canada – TeraGo closed its previously announced $9.5 million acquisition of Data Centers Canada
(DCC) on May 31 and hosted an analyst call. While the transaction multiple was not disclosed, we estimate that it is a reasonable 6.9x 2014E EBITDA. With its 16,000 sq. ft. facility in Vaughan, ON, one of TeraGo’s primary fixed-wireless markets, we see significant cross-selling
DCC is expected to be immediately accretive to EBITDA and EPS – DCC has an ARPU per rack of $1,050 and a base of 165 customers. We expect
$2.8 million of revenue contribution in 2014. Management expects DCC to be immediately accretive to EBITDA and EPS and is targeting 50%
EBITDA margins from DCC after the integration process is complete in Q4/13. This compares with TeraGo’s Q1/13 EBITDA margin of 34%.
Expect minimal capex for DCC in the near to medium-term – With a current capacity of 280 racks and only 207 racks in use today, TeraGo sees
minimal near to medium term capex requirements. We do not forecast any major incremental capacity capex requirements until 2016. DCC
also has enough space to accommodate 304 racks in its data centre at this time.
Increasing our target price to $14 from $12 due to the inclusion of DCC in our estimates – While much will depend on execution, we believe our
new forecasts that include DCC are conservative. Given growth and accretion potential from the acquisition, we are increasing our DCFderived
target price to $14 (EV of 7.4x our new 2014E EBITDA minus our new 2014E year-end net debt) from $12 (EV of 7.2x our previous 2014E EBITDA). We continue to believe that TeraGo shares have been deeply oversold since the company announced the end of its strategic
review on April 16 and encourage small cap investors to take advantage.
Posted by jackbassteam on June 7, 2013
Image via CrunchBase
AKAM : NASDAQ : US$46.12
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.
With strong volume momentum in the underlying business and continued improvements in the company’s cost structure as spelled out in the 10-Q, we increasingly believe Akamai is once again set to deliver impressive results for the balance of the year despite the incremental investments in the business this and next year. Accordingly, we are increasing our estimates and our price target to $51 from $46 on the belief of an upward bias to estimates and the recognition that volume growth might offset the incremental margin pressures associated with investments announced earlier this year.
Strong growth likely sustainable – With multiple companies in the sector reporting similar trends, we believe the surprisingly accelerating revenue growth reported by AKAM in Q1/13 is sustainable throughout the year. We believe guidance remains conservative.
Cost improvements continue – Based upon details reported in the company’s 10-Q, we believe it is likely that key fixed components of the company’s cost structure will continue to improve. Although additional investments are likely in Q2/13, we expect margins could improve starting in 2014.
AKAM remains a BUY-rated stock – Even though the stock has recovered from the lows of the year, we continue to recommend the shares for purchase. Although volatile, we continue to believe shares represent an attractive risk/reward for investors
Posted by jackbassteam on May 24, 2013
The official logo for the ARM processor architecture (Photo credit: Wikipedia)
ARMH : NASDAQ : US$47.24
ARM : LSE
ARM is a leading semiconductor IP supplier to the diverse global semiconductor market. ARM’s revenues are driven through a licensing and royalty business model, with a majority of the royalty sales driven by the mobile market
including handsets, smartphones, and tablets. ARM also supplies semiconductor IP to the server, PC, and embedded markets and physical implementation libraries and IP to semiconductor foundries.
All amounts in US$ unless otherwise noted.
From ARM’s analyst day yesterday in London where ARM management highlighted strong longterm market and royalty growth opportunities in both high- and low-tier smartphones.
We believe ARM is well positioned to benefit from quickly increasing emerging market feature phone to smartphone upgrades, ramping low-tier tablets, and high-tier smartphone platform refreshes that should drive royalty TAM growth and rate expansion. Further, with a growing number of ARM partners moving toward multi-core Cortex-A, big.LITTLE, and ARMv8 designs at leading edge process nodes, we anticipate strong license sales in the near to medium term will drive strong royalty revenue growth and both operating and earnings leverage long term. We reiterate our BUY rating and raise our price target to $56.
Our Q1/13 monthly handset sales surveys and recent March quarter results and June quarter guidance for ARM mobile chipset partners are consistent with ARM’s estimates for very strong growth of the low- and mid-tier smartphone markets and also resilient growth of the high-tier market driven flagship launches and 4G/LTE upgrades.
At its analyst day, ARM shared its target of 15-25% smartphone royalty sales CAGR through 2017 and anticipates smartphone unit CAGR of 20% for the industry during the same period. In fact, this estimate includes growth in both the high- and lower-tier smartphone markets, and we believe ARM will generate significant royalty revenue growth from both tiers driven by a royalty rate expansion multiplier in the slower-growing high-tier market and upgrades
from lower royalty feature phones in lower tiers.
Due to increased royalty estimates from lower tier smartphones and tablets, we are increasing our 2013 earnings/ADS estimate from $1.01 to $1.02 and our 2014 estimate from $1.31 to $1.35.
Our $56 price target (from $52) is based on shares trading at
roughly 42x our 2014 normalized earnings/ADS estimate.
Posted by jackbassteam on May 23, 2013
VNET : NASDAQ : US$9.46
The largest carrier-neutral Internet data center service provider in China, 21Vianet hosts customers’ servers and networking equipment and provide interconnectivity services. The company also provides managed network services through its data transmission network
We maintain our BUY rating and $15.00 price target following 21Vianet’s Q1/13 report that demonstrates its ability to sustain its growth
momentum and overcome some of the temporary disruptions from capacity upgrades. We believe that the incremental investments in new
data centers, network capacity and cloud computing, while temporarily dampening margins, will result in higher growth and profitability in 2H13
and beyond. Priced at 5.7x 2014E adj. EBITDA, the shares of VNET offers compelling risk/reward for investors, in our view.
Solid revenue, slightly soft margin on investments – Q1/13 revenue came in stronger than expected (RMB 435.7M vs. 433.3M CGe) with
slightly lighter-than-expected EBITDA (RMB 80.1M vs. 82M). We note that higher-than-expected operating costs were attributed to higher
bandwidth costs with greater network capacity and continued investments ahead of revenue contribution from cloud computing.
Signs of hope from Q2/13 outlook – Although Q2/13 guidance is not as strong as we had hoped, it nonetheless confirms our view that the
disruption from recent capacity upgrade is now behind and that the company’s growth momentum is picking up again. Following two quarters of decelerating growth, we believe the change in trajectory marks an important inflection point for investors.
shift to higher MRR cabinets in large cities and revenue contribution from Microsoft cloud will likely improve both revenue and margins
Posted by jackbassteam on May 21, 2013
Image via CrunchBase
P : NYSE : US$16.57
Pandora radio is the market leader in personalized Internet-based radio listening in the US. The company uses its proprietary algorithms as part of the Music Genome Project to generate playlists for users that are personalized and cater to the tastes of individual users.
While competitive developments continue, we believe fundamentals at Pandora remain strong heading into Q1 earnings next week. Our proprietary analysis points to a growing audio ad load (driven by robust adoption of the STRATA integration) and higher quality of advertisers
(big national brands). In addition, the temporary 40-hour listener cap on mobile appears poised to dampen content costs. As such, several
positives are coming to a head at once. Given the timing, Q1 impact is hard to gauge but likely positive, while impact to Q2 and beyond should
be more positive. Our best estimate is that guidance should be somewhat bullish without being irresponsibly aggressive.
Our proprietary research (admittedly a small sample) indicates an audio ad load that has gone from 1.40 minutes per hour a month ago to 1.75 minutes currently. We believe this is being driven by sales force ramp, Triton measurement, and STRATA integration. This should drive higher RPMs.
We also believe subscription revenue and content costs could both show improvement in Q1 from the 40-hour mobile cap, with more impact in Q2 and beyond.
We believe Google’s newly announced $10/month “All Access” subscription service should have only a moderate competitive impact on Pandora’s listener base, which clearly likes free stuff.
Our $18 target is unchanged and is based on 32x our F2017 EPS estimate of $0.90, discounted to present at 12.1%.
Posted by jackbassteam on May 17, 2013
RDA : NASDAQ : US$9.98
RDA Microelectronics designs, distributes, and markets RFIC, connectivity, and baseband solutions primarily to Chinese handset OEMs and ODMs. While RDA’s sales are primarily into the 2G market, RDA has introduced 3G power amplifier products and has EDGE and 3G baseband products on its 2013 roadmap to address the growing smartphone market.
All amounts in US$ unless otherwise noted.
PRODUCTS SHOULD CONTINUE GM EXPANSION
RDA reported strong Q1/13 results and guided Q2/13 sales and gross margin slightly above our estimates.
Following the acquisition of Coolsand, we believe RDA’s baseband portfolio has significantly increased its addressable market as evidenced by strong recent sales results. Further, we believe RDA’s roadmap that integrates its connectivity and RFIC solutions with its baseband platform
is well positioned in low- and mid-tier handset markets, and this should expand RDA’s dollar content share per handset in the near 1B unit
Chinese OEM handset market. In addition, we believe RDA remains on track to achieve volume sales of both EDGE baseband and 3G PA solutions in 2H/13 that should drive sales growth and steadily improving gross margin.
We maintain our BUY rating and increase our PT to $17.
RDA reported Q1/13 sales of $97.2M and pro forma EPS of $0.28 versus our $96.6M/$0.25 estimates. RDA posted strong sales of the higher margin 8851 baseband solution, including record baseband sales during March post Chinese New Year. In fact, RDA management shared a 40% 2G baseband market share goal for 2013 within the Chinese OEM market, and we estimate RDA will ship roughly 200M baseband chips in 2013, up over 100% Y/Y.
With an improving mix of higher-margin baseband and connectivity products, including a new cost optimized solution to help offset
persistent pricing pressure in the 2G PA market, we anticipate modestly improving gross margin trends throughout 2013 with 35% remaining RDA’s medium-term target post the Coolsand acquisition.
Given RDA’s market exposure and strong product roadmap, we have increased our 2013/14 operating expense estimates we expect will remain roughly 16% of sales. However, strong sales trends still result in an increase to our 2013 pro forma EPS estimate from $1.50 to $1.56 and our 2014 estimate from $1.80 to $1.87.
Our $17 (was $16) price target is based on shares trading at roughly 9x our 2014 pro forma EPS estimate
Posted by jackbassteam on May 9, 2013
RIM BlackBerry 7230 (Photo credit: Wikipedia)
BBRY : NASDAQ : US$15.63
BB : TSX
BlackBerry Ltd. is a designer, manufacturer and marketer of wire less solutions for the mobile communications market. Through development and integration of hardware, software and services, the company provides solutions for access to information including email, messaging, Internet and intranet-based applications
Canaccord says that its global surveys indicate mixed BlackBerry sell-through trends, with weakening sales of the Z10 over the past month but strong initial demand for the limited supply Q10.
Given the weaker Z10 sales levels combined with more limited initial supply of the Q10 than our expectations, we are lowering our BB10 selling
estimates for the May quarter from 3.3M to 2.8M units. While we anticipate stronger near-term results for BlackBerry as higher margin BB10 smartphones sell into the channel, we do not believe BlackBerry can achieve sell-through market share levels to return to sustained profit
levels. Therefore, we reiterate our SELL rating and $9 price target.
Given store surveys indicated slowing Z10 sales at Verizon, AT&T, and T-Mobile combined with lower supply levels of the Q10 with a physical keyboard than our expectations, we have reduced our May quarter BB10 smartphone shipment estimates from 3.3M units to 2.8M units.
With new BB10 smartphones facing increased high-end competition from the Samsung Galaxy S4 and the HTC One, we anticipate Z10 sales could further weaken in the consumer retail channels. However, we anticipate a strong ramp in Q10 sales over the next several months could more than offset the slower Z10 sales.
While we have lowered our BB10 estimates, we modestly lower our 2013 LPS estimates given our belief BlackBerry may temper nearterm
marketing plans until supply levels of the Q10 improve.
Given our lower BB10 estimates primarily from our lowered Z10 sales assumptions, we reduce our F2014 LPS estimate from ($0.37) to ($0.44). Our F2015 LPS estimate of ($0.75) remains unchanged.
Posted by jackbassteam on May 7, 2013
English: The Great Wall of China, near Beijing in July 2006. This is a section of Mutianyu. (Photo credit: Wikipedia)
NQ : NYSE : US$9.17
NQ Mobile is a leading provider of consumer-centric mobile Internet services focusing on security and productivity. NQ Mobile has leading share of the mobile security market in China. The company was founded in 2005 and headquartered in Beijing, China
We believe NQ Mobile is well positioned in the mobile security and overall mobile applications markets given its strong share in China, expanding international deal pipeline and customer base, and broadening product and services portfolio. We reiterate our BUY rating and $17 price target.
We believe NQ Mobile is well positioned for strong international growth in 2013 with a growing deal pipeline including recently signed deals with Russell Cellular, Axiom Telecom, America Movil, U.S Cellular, and others. We remain impressed with the NQ’s expanding customer/partner network and believe co-CEO Omar Khan continues to expand NQ’s customer reach through new deals. In fact, we believe NQ’s retail dealer program now includes nearly 2,000 mobile retailers in the U.S.
We also believe NQ Mobile is well positioned to leverage its leading mobile security market share in the rapidly growing mid- and lowtier
Chinese smartphone market. Further, with NQ Mobile now offering its mobile security solutions for Qualcomm’s QRD platform and with NQ’s deep integration with MediaTek’s smartphone chips through NQ’s Hesine investment, we believe these initiatives should result in future OEM pre-installation agreements. Pre-installs generated roughly 40% of NQ’s 2012 Chinese registered user adds.
With NQ issuing additional shares to finance its recent Q4/12 Feiliu acquisition, we have increased our share count along with our stock
compensation expense for GAAP earnings. Due to our increased share estimates, we slightly lower our 2013 pro forma EPS estimate from $0.95 to $0.91 and our 2014 estimate from $1.25 to $1.20.
Our $17 price target is based on shares trading at roughly 14x our 2014 pro forma EPS estimate.
Posted by jackbassteam on May 7, 2013
This logo is the stacked version of the Integrated Device Technology Inc. (Photo credit: Wikipedia)
IDTI : NASDAQ : US$6.93
IDT designs, develops, manufactures and markets a range of semiconductor products for the communications, computing and consumer industries.
Computing products are designed for use in desktops, notebooks, workstations and server applications while consumer products are optimized for gaming consoles, set-top boxes, digital TV and smartphones. Communications products are designed for use in networking and telecom applications.
All amounts in US$ unless otherwise noted.
BOOKINGS STRENGTH IN CORE BUSINESS
We reiterate a BUY rating as healthy top-line guidance is offset by incremental spending for wireless chargers and NVMe. New products remain on track for strong Y/Y growth, while communications, memory interface and even PC clocks see improving demand. We expect opex to decline Q/Q from the Sept Q onward with the resulting leverage driving the shares higher.
IDTI reported CQ1/13A (Mar) after the close. Revenues and EPS were $108.5 million and $0.01, compared to consensus estimates of $107M/$0.01 and our estimates of $108M/$0.01. Revenue of $108.5 million came in at the mid-point of the guided range driven by weakness in core products partially offset by strength in new products and EPS of $0.01 was in line with guidance driven by flat operating expenses and better gross margins.
Management guided revenue and EPS of $116 million (+7% Q/Q) and $0.04 at the mid-point, compared to consensus expectations of $113 million and $0.05. Management expects operating margin expansion through F2014 driven by opex reductions.
IDTI’s price target of $9 is 16x our C2014 EPS estimate of $0.45
plus net cash of $2.01/share.
Posted by jackbassteam on May 1, 2013