Stephen Simpson, CFA
Long only, growth at reasonable price, value, research analyst

Altera: A Semiconductor Catch-Up Play Long In The Making

More than half of the sell-side analysts covering Altera (NASDAQ:ALTR) have a Buy/Strong Buy rating on the shares, with many of them calling for a catch-up trade relative to Xilinx (NASDAQ:XLNX) driven by gains in 28nm and a strong start with Intel's (NASDAQ:INTC) 14nm process. Discounted free cash flow does suggest that these shares are undervalued enough to be worth a good look, but management needs to deliver better margins and investors should not underestimate the challenges in competing with Xilinx.

A Quick Summary

Together Xilinx and Altera dominate the $4.5 billion-plus PLD/FPGA space with around 90% share. These logic chips compete with ASICs and ASSPs; the primary difference being that the latter...

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