Lehman Sets $31 Target For National Semi On Rising Orders, Buybacks

Looking for ideas in analog semiconductor makers? Lehman Brothers analyst Romit Shah says you should consider the stock of National Semiconductor (NSM), which after a 14% pullback in a month and a half, has about 20% upside (from Monday’s close of $25.87) to his price target of $31, which he’s raised from a target of $29.

He raised his rating Tuesday on the stock from Equal Weight to Overweight.

Shah’s forecast for the current fiscal first quarter ending August is right inline with the Street’s view, at $467 million in sales and 25 cents a share in profit, but he thinks the company’s plans to buy back up to $2.4 billion of its stock could be more accretive than some expect. National in early June said it would pursue a $1.5 billion accelerated buyback plan, on top of existing buy back authorizations.

The buyback comes as demand from customers seems to be improving, says Shah:

[National’s] orders are improving in August […] Should end demand remain steady, we believe NSM is well positioned for a snapback with disti inventories down 12% in Q2. We note that following a weak June/early July, [book-to-bill ratio] is ~1.0 in Aug and key distributor Arrow Electronics (ARW) is placing expedite requests. Wireless and displays solid.