- A new acquisition should strengthen its market position for high-demand technologies.
- Its stock has high liquidity and a climbing share price.
- Q1 earnings beat consensus and Q2 earnings will be announced soon.
There was a time when Atmel Corporation (NASDAQ:ATML) was a relatively unknown semiconductor manufacturer. However, in recent years, Atmel has claimed its share of the market, particularly with its touch screen controllers and sensors. With the market for touch screen devices continuing to grow and following momentum of a recent acquisition, Atmel's future looks bright. But is it right for your portfolio?
Diversification Beyond Touch Screens
Atmel's recent focus has been on its various products used in touch screen devices for manufactures like Asus, Lenovo (OTCPK:LNVGY), Sony (NYSNE) and Samsung (OTC:SSNLF). But with the recent acquisition of Newport Media Inc. - a manufacturer of Wi-Fi and Bluetooth products - Atmel has now diversified itself into other growing areas.
The deal, which was announced in early July, was completed this past Thursday. The combination of Atmel's existing product line and Newport Media's products could mean exciting new consumer devices with longer battery life. In a press release, Steve Laub, Atmel's president, stated that the acquisition would expand Atmel's "already strong wireless portfolio with the addition of 802.11n Wi-Fi and Bluetooth." Perhaps more importantly for Atmel, the acquisition strengthens the company's role in the newly created Open Interconnect Consortium, which strives to establish standard protocols for how a wide variety of devices connect to the Internet in what is generally called the Internet of Things.
Atmel's Latest Numbers
Atmel will release its second quarter earnings results this Wednesday, August 6, at 2 p.m. Pacific time. The company's last earnings announcement happened on April 30, 2014, where the company reported $0.07 EPS, which beat consensus of $0.06, and a quarterly revenue of $337 million versus consensus of $325 million.
Of course, earnings announcements can be unpredictable, but overall Atmel's share price has been fairly steady as of late, at least for a company in the technology sector. Since its April earnings announcement, shares of Atmel have dipped below $7.50 and climbed to over $9.50 per share. Currently, analysts seem split on the stock, with seven rating it a "hold" and seven calling it a "buy." However, Morgan Stanley (NYSE:MS) has a set a price target of $10 while Raymond James (NYSE:RJF) and Imperial Capital both have a price target of $11. Given this stock's current trading range, it would seem there is still some upside, and if Atmel reports positive earnings this week, it's possible we could see $10 or $11 soon. Of course, that's a bullish view. If Atmel's earnings disappoint, investors could be holding onto this stock for quite some time before seeing it achieve those price targets.
No Company Is Perfect
It is often easy to view stocks that trade below $10 a share as too cheap or potentially too volatile. However, with an average daily volume of over five million shares, Atmel doesn't typically see a lot of volatility, and with a market cap of $3.5 billion and $1.39 billion in revenue, Atmel has potential to be a great investment. The company has managed to position itself to supply components for products that are in high demand, and it is now in the position to play a key role in the connectivity of a wide variety of "smart" devices.
This is not to say that Atmel is flying so high that everyone should buy it today. When looking at its industry competitors like Intel Corporation (NASDAQ:INTC) and Texas Instruments (NASDAQ:TXN), Atmel's market cap and revenues are relatively small. Additionally, Atmel's trailing PE ratio is 134.96 whereas Intel's is 16.74 and Texas Instruments' is 22.22, which would seem to indicate that Atmel isn't for investors seeking a bargain. Conversely, this might be a sign of investors' overall confidence in Atmel's possibilities for growth.
The Bottom Line
Depending on how adventurous you are in your investing, it may be wise to sit on the sidelines until second quarter numbers are released. That said, even if numbers disappoint, it is likely that shares will recover from a slight miss on consensus estimates as Atmel currently has a lot going for it, and the acquisition of Newport Media strengthens this company's future even more. Between its strong position in the touch screen market and a growing presence in the Internet of Things, Atmel has positioned itself to profit from products that will be in high demand for years to come.
Disclosure: The author is long ATML. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.