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MU, AVGO, SYNA higher after Mizuho provides bullish coverage

May 22, 2015 12:51 PM ETMicron Technology, Inc. (MU) StockSYNA, MU, AVGOBy: Eric Jhonsa, SA News Editor3 Comments
  • As part of a broader chip stock coverage launch, Mizuho's Vijay Rakesh has assigned Buy ratings to Micron (MU +2.2%), Avago (AVGO +1.8%), and Synaptics (SYNA +2.6%). His targets are respectively $39, $150, and $115.
  • Like other bulls, Rakesh sees Micron's PC DRAM sales (recently under pressure) improving in 2H15, aided by the launch of Windows 10 and Intel's 14nm Skylake CPU platform. He also downplays concerns about Micron's 20nm DRAM transition, thinks tri-level cell (TLC) and 3D NAND ramps will drive NAND gross margin improvement, and likes the hiring of Ernie Maddock as CFO.
  • Rakesh forecasts Avago will continue benefiting from strong FBAR filter sales (boosted by 4G phone growth), growing smartphone dollar content, and the Chinese 4G ramp (aided by recent carrier tariff cuts). "AVGO is completely booked on its FBAR filter capacity through 2015 and the ramp of its industry leading 8-inch FBAR wafer capacity will likely lead to significant operational efficiencies versus its peers"
  • He also notes Cisco is seeing strong sales for its ASR 9000 edge router line, which Avago has exposure to, and expects the Emulex deal to boost margins and EPS.
  • TDDI (integrated touch/display driver) ICs, fingerprint sensor sales, and Chinese 4G demand are expected to act as tailwinds for Synaptics. Rakesh forecasts the company will produce FY16 (ends June '16) free cash flow of $304M, and thinks this could pave the way for buybacks.
  • Synaptics has made fresh highs, and Avago is within $5 of a high of $136.28. Micron remains 25% below a high of $36.59.

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