JP Morgan says that Varian Semi (NASDAQ:VSEA) is one of their absolute Top Picks within their Share Gain and Margin Expansion Thesis and is on the JPMorgan Focus List. Based on an unchanged 17x target P/E multiple applied to firm's new C2008 GAAP EPS estimate of $4.10, up from $3.40 previously, they are raising their March 2008 stock price target to $70 from $58.
In line with firm's detailed memory-related research and their recent report on TSMC stepping up to the plate with new orders, the firm sees some modest upside to previous Varian forecast, especially for C2H07 on the TSMC business. As such, they are raising C2H07 revenue estimates by $5mn. per qtr. New C07 and C08 rev ests are $1.0bn and $1.2bn, respectively.
JPM raised VSEA to OW and substantially increased revenue forecast when Applied (NASDAQ:AMAT) announced its departure from the Ion Implant business but left their margin forecast
unchanged. Firm is increasingly confident that Varian is likely to see better pricing with Applied out of the market. They also see an increase in high margin spares-related business.
VSEA trades at 12.0x new C2008 GAAP EPS estimate of $4.10 vs. group average of 13.4x. In their view, VSEA is one of the most potentially explosive equipment stocks on share gain and margin expansion, as well as solid execution.
Notablecalls: Looks like an actionable call! Expect to see strong buy interest in VSEA today.