Following video chipmaker Genesis Microchip Inc.'s warning on its F4Q06 revenue, Wedbush Morgan analysts Craig Berger and James Schneider sent a note to clients reiterating their enthusiasm for the stock. Key points from the note:
* Investors should continue to BUY GNSS and can do so aggressively at or below $18 per share as we believe that the stock's fundamental thesis remains intact. Near term demand weakness and yield problems should be short lived, allowing a cheaper entry point into the stock, with good prospects for solid sequential revenue growth in both the June and September quarters, and likely at least $0.50 of earnings power in calendar 2H'06.
* Genesis yesterday negatively pre-announced March '06 revenues of $60-61 million compared with prior guidance of $62-67 million on weak TV demand in Europe and China. Gross margins were also guided lower due to a short-term manufacturing yield issue.
* We expect that recently announced LCD TV design wins with top-tier customer Sony, in addition to the new production ramp occurring at Samsung, will contribute to a strong snap back in demand for June 2006.
* Lowering calendar 2006 EPS estimate from $0.98 to $0.75, calendar 2007 EPS estimate from $1.09 to $1.05, and price target from $25 to $24; Reiterate BUY rating as near-term weakness presents a buying opportunity in advance of the seasonal build for LCD TVs.
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GNSS 1-yr chart: