CIBC analysts Daniel Gelbtuch, Rick Schafer, Hugh Cunningham and Dan Morris sent a note to clients Thursday evening regarding digital media semiconductor company Trident Microsystems (TRID), following Trident's strong quarterly earnings report. Key points from the CIBC note:
* We are reiterating our SO on TRID, increasing estimates, and raising our target from $19 to $30 - following the release of excellent fiscal 2Q06 (ends December) results. We still believe TRID is the optimal and best levered play on the "white hot" LCD-TV market, which is set to double in CY06.
* TRID reported EPS of $0.17 on revs of $40.6M (+22% QoQ), better than our estimate of $0.15 on $39M. Operating margins expanded 260bp to 27.2%. TRID's success was attributed to excellent LCD-TV sell-through, especially at their top-tier customers, Sony, Sharp, & Samsung (all NR).
* In spite of typical seasonality, TRID guided for flat to up March revs (i.e. $40.7M+), versus our prior estimate of $36M. EPS is expected to be $0.16- 0.17 better than our estimate of $0.12. We have increased our CY06 estimates to better reflect TRID's widening DTV image-processing lead.
* At 17.9x our new CY07 EPS estimate of $1.20, TRID is trading at a 12% discount to its Digital Media peers (20.3x). Thus, we would be strong buyers of TRID (especially on weakness) in light of TRID's strong position in a rapidly growing end-market, which may render our estimates conservative
TRID 1-yr chart: