We believe recent design wins along with excess inventory being depleted is a significant near-term catalyst for revenues in [the second half of calendar 2007]. We would be buyers of the stock based upon their improved fundamentals.
Lau said he thinks the company’s improving fundamentals “will become evident” at the Computex trade show in Taiwan the week of June 5-9. “We wanted to be proactive in our upgrade today ahead of that major conference,” he wrote.
Lau said his call represents “a short term buying opportunity on improving fundamentals to one of the largest RF semiconductor companies in the world…we believe there has been a significant change in order activity recently.” Lau says he now sees June quarter revenue of $234.4 million, above the company’s guidance of $215 million to $230 million. Lau sees EPS of 24 cents for 2008 and 44 cents for 2009, above the consensus at 23 cents and 34 cents.
Lau notes that the company has a huge reliance on two key cell phone makers: in 2006, he says Nokia (NOK) was more than 35% of revenue, and Motorola (MOT) more than 30%.
Lau, who went to a Buy from a Hold on the company, raised his price target to $9 from $7.
RFMD 1-yr chart: