EagleTest Systems Should Rise on Great Canaccord Adams Call

Canaccord Adams is adding EagleTest Systems (NASDAQ:EGLT) to their Best Ideas list with a $22 tgt saying their research leads them to believe that Eagle Test's business is improving off the JunQ3 trough level -- driven by progress at new customers as well as spending environment improvement in the analog/mixed-signal segment.

Firm believes progress at its newer customers will help Eagle deliver sequential growth in SepQ4, potentially at the upper end of guidance. Eagle Test's Q4 guidance was $19-23M/$0.04-$0.11, and they model $22M/$0.10 -- up from Q3's $19.9M/$0.09. Eagle is early in its ramp at multiple new customers, although the firm expects material contribution from at least one major new customer (ST) in Q4. Firm models minimal growth at top customer TI, a potential source of upside. They look to Eagle Test's projects at new customers to drive substantial growth and opportunity for upside looking forward. Adams believes Eagle Test is best positioned to outperform its peers as we near what they believe is the end of the current downturn.

They would be buyers of EGLT at the current price, and maintain target price of $22 (15x C2008E EPS, ex. cash and interest), a 77% potential return from the current price.

Notablecalls: Great call by Canaccord Adams' Dennis C. Wassung! EGLT isn't a widely followed play, so a call like this does carry a lot of weight. If thing are indeed getting better as Mr. Wassung says they are, EGLT looks like a screaming buy here.

I'm going to call this one "actionable" here.

Comments

[Dan Jacome:]

I'll pass, I looked @ EGLT and they are a needle in a haystack. Id be surprised if it survives above the 50 day. Short it on a pullback. The semi space is brimming with uncertainty and you are better off sticking to quality. Our #1 idea in the space remains VSEA, which is attractive under 50, by a mile.

Listen to the LRCX call -- things are nowhere near "squared away." Are they ever?

2007 Oct 15 09:43 PM