Wedbush Morgan analysts Craig Berger and James Schneider sent a note to clients Monday on Fairchild Semiconductor (NASDAQ:FCS), ahead of the company's scheduled mid-quarter update this morning. Key excerpts:
● We believe Fairchild could increase its Q1 revenue growth guidance by up to two percentage points versus its prior guidance when the firm issues its mid-quarter update press release before the market opens on Tuesday, March 7.
● Analog capacity shortages are likely to gate further revenue upside in Q1, with most upside coming from lower margin discrete chip shipments.
● Fairchild is also likely increasing prices to customers, with initial price increases likely to benefit its margins and EPS in Q2.
● EPS upside of one penny is likely for both Q1 and Q2 given strength of recent demand and pricing trends, though we believe valuation remains uncompelling with shares trading at 21x and 17x upside EPS scenarios for 2006 and 2007, respectively.
● Reiterate HOLD and $19 price target.
FCS 1-yr chart: