Deutsche Bank is out with an interesting call on Zoran (NASDAQ:ZRAN) saying they believe the company is successfully diversifying revenues with strong product cycles in digital cameras and DTV, with new ramps in camera phones and Tier 1 TV manufacturers in 2008.
Firm believes that ZRAN is likely to show upside vs the $135-140M guidance, with strong growth in cameras (vs DB 5% estimate) and DTV (vs DB 15% estimate). For Q4, tey believe that TV will be flat to up, cameras down slightly, and overall revenues down about 10% off a higher Q3. Firm also believes that ZRAN will reach operating margins of 15% in Q3, and they expect that investors will slowly realize the potential for ZRAN to have consistent margins of 15%+ in C08 vs DB 11.8%.
At 16x C08 EPS, they believe that the risk/reward is very favorable. DB's $28 target is based on 22x non-GAAP C08 EPS of $1.27, a discount compared to semi peers trading at 25-30x peak EPS. Reiterates Buy.
Notablecalls: This is a bit of an out-of-consensus call which is why I like it. If Deutsche's right, ZRAN's headed higher here.