Following Zoran's (ZRAN) stellar earnings report (read conference call transcript), which sent the stock up fully 28% today, Wedbush Morgan analysts Craig Berger and James Schneider sent a note to clients reiterating their bullish stance on the video chipmaker. Key points from the note:
* Zoran reported another quarter of significant revenue and EPS upside versus expectations, a positive that allows our growth and profitable diversification thesis further room to run.
* Q2 revenue and EPS guidance much better than consensus as digicam, DTV, and DVD segments should all grow sequentially; guidance of $0.26 to $0.29 significantly better than consensus estimates of $0.14.
* Higher than expected Q2 OpEx guidance is the only real negative in Zoran's quarter, with the firm investing in 90nm mask sets in order to stay a technology leader.
* We remain at a BUY rating as 2006 looks bright for Zoran, with positive channel checks driving near-term momentum, and a strong product lineup fueling revenue growth, margin expansion, and earnings power.
* Increasing 2006 EPS estimate from $1.01 to $1.25, 2007 EPS estimate from $1.20 to $1.40, and price target from $25 to $30; Reiterate BUY rating as continued strength in digital camera and DTV chip businesses bears out the revenue diversification and gross margin expansion story.