CIBC analysts Daniel Gelbtuch and Rick Schafer raised their rating for Omnivision from Sector Performer to Sector Outperformer with a $32 price target. Highlights from their note to clients:
* FY3Q EPS of $0.53 on revs of $137.3M, well exceeded our estimates of $0.45 and $135M. Gross margins improved 420bp to 40.3% (well ahead of our 36.7%), due to improved yields and a better than expected mix of 1.3MP sales. The company shipped 42M sensors during the quarter.
* Seasonally soft F4Q guidance was the likely reason for OVTI's 12% afterhours decline. However, we believe the focus should be on guidance for 35%+ long term gross margins, QoQ F1Q07 growth, and the ramp of higher margin products. We are rebalancing and increasing our CY06 estimates.
* At 13.7x ($24.05 in after hours trading) our new CY07 EPS est. of $1.75, OVTI trades at a 30%+ discount to its peers (20x). In spite of OVTI's competitive risks, its $5.71 cash-per-share and bloated short interest (22% of float; 5.5 days to cover), only enhance our bullish trading stance.
See OVTI's conference call transcript.