Fairchild Semiconductor: More Upside In Store After Strong Third-Quarter ResultsHarsh Singh Chauhan • Nov. 24, 2014
- Fairchild Semiconductor is turning around impressively as it is delivering margin and revenue growth.
- Fairchild's automotive solutions will remain in strong demand as the industry is on a roll.
- Fairchild is facing some pressure in the industrial market, but the conditions are expected to improve.
- Fairchild is making moves into wearable technology, opening yet another area of growth for itself.
Fairchild Semiconductor Buying Back 10% Of Its Shares In 2014
- While achieving an impressive Non-GAAP FCF margins rebound toward the record 12% and delivering shareholder value through strong share buybacks, the top line growth still has been lagging.
- There are signs the semiconductor industry may be bracing for a cyclical slowdown or at least a seasonal lull as customers minimize year-end inventories slightly more than other years.
- Thanks to proactive right-sizing, inventory buffers and higher share of outsourced production, margins should be more resilient in the next down cycle.
- Fairchild expects to repurchase more than 10% of its shares outstanding in 2014 and to continue returning 100% of its excess FCF in 2015 to shareholders.
- Fairchild’s stock offers a roughly 13% upside within 12 months with a $15 target price. Potential semiconductor industry slowdown and peak margins represent the main downside risks.
Update: Fairchild Semiconductor Q3 Earnings - Improved Margins And Low Tax RateMartin Vlcek • Oct. 17, 2014
- Fairchild reported strong results, beating on sales and adjusted EPS. Margins improved, debt decreased due to strong FCF generation.
- Last year, I advised to buy Fairchild on dips. The stock rewarded patient investors with up to 40% gains but recently fell hard along with other small-caps.
- I reiterate my buy recommendation with an intrinsic value of ~$14 to $15, offering a ~10% to 20% upside within a year as negative market and industry sentiment turn around.
Fairchild Semiconductor: 3 Different Insiders Have Sold Shares During The Last 30 Days
- 3 insiders sold Fairchild Semiconductor stock within one month.
- The stock was not purchased by any insiders in the month of intensive selling.
- All 3 of these insiders decreased their holdings by more than 10%.
Thu, Jan. 22, 10:35 AM
- In spite of its Q4 miss, Fairchild (NASDAQ:FCS) is guiding for Q1 revenue of $340M-$360M, in-line with a $352.1M consensus. However, gross margin is expected to fall to 31%-32% from Q4's 32.4%, which itself was down 290 bps Q/Q and 110 bps Y/Y.
- The analog chipmaker notes 2014 sales (only up 2% from 2013) were hurt by "lower demand across the year from one large customer." On the other hand, it states "incoming order volume increased in December and has accelerated so far in January."
- It forecasts "seasonally higher [Q1] sales for our products serving the automotive, industrial and appliance end markets offset by normal weakness for consumer-related products." Mobile chip sales are also expected to be up Q/Q.
- $142M was spent on buybacks in 2014. Opex fell 1% Y/Y in Q4 to $101.1M.
- Q4 results, PR
Thu, Jan. 22, 7:34 AM| Comment!
Wed, Jan. 21, 5:30 PM
Thu, Jan. 8, 4:18 PM
- Hit hard on Tuesday amid a market rout, chip stocks have more than made up for it today: The Philadelphia Semi Index (SOXX +3%) handily exceeded the Nasdaq's 1.8% gain. The index posted a 1% gain yesterday.
- Micron (MU +4.9%) has been one of the standouts, more than recouping yesterday's post-earnings losses. Ditto Freescale (FSL +9.2%), which benefited from a Deutsche target hike, and Marvell, which got a lift from an MKM note. Others: NVDA +3.8%. NXPI +4.7%. AVGO +5%. SWKS +4.5%. CY +6.1%. CODE +5.9%. CAVM +5.2%. SWKS +4.5%. SLAB +4.5%. KLIC +3.8%. SMTC +3.6%. ATML +3.7%. FCS +4.2%. TSEM +4.2%.
- As is their custom, both chipmakers and their clients have been unveiling plenty of new products at CES.
- ETFs: SMH, XSD, PSI, SOXL, USD, SOXS, SSG
Nov. 17, 2014, 1:09 PM
- In order to "streamline the company's reporting structure," Fairchild's (FCS -1.3%) operations team will now report to chairman/CEO Mark Thompson, who is assuming the title of president. COO Vijay Ullal has left the company.
- Thompson: "Mr. Ullal has made valuable contributions during his tenure ... During this period it also became increasingly clear that the company and Mr. Ullal had different perspectives about what constitutes effective, sustainable leadership, which ultimately led to his departure."
- Shares remain halted. Many other companies have also eliminated the COO position.
Nov. 17, 2014, 12:57 PM
Oct. 31, 2014, 11:31 AM
- Three weeks after providing a calendar Q3 warning that triggered a massive chip stock rout, Microchip (MCHP +7.3%) has provided Q4 guidance that's in-line with lowered estimates. The microcontroller vendor, which has often seen trends emerge ahead of peers, also said it saw most of its inventory correction in Q3, and expects Q4 sales to be just "slightly below typical seasonal levels."
- Chip stocks are up strongly (SOXX +4%) on a day the Nasdaq is up 1.4%. Since Microchip's warning, a slew of analog chipmakers and microcontroller firms (e.g. Atmel, Freescale, STMicro, Intersil, Linear) have offered light Q4 guidance, and other firms have reported seeing high-end Android weakness (e.g. Synaptics, Cirrus Logic, Amkor).
- On the other hand, several mobile chipmakers (Skyworks, RF Micro, TriQuint, Silicon Motion), some of which have decent iPhone exposure, have provided strong results and/or guidance. Other chipmakers, such as Broadcom, Texas Instruments, and Xilinx, have rallied after delivering in-line guidance.
- Susquehanna's Chris Caso: "By now, we think it’s clear that the weakness MCHP saw in September is not company specific ... The question now is if the full extent of the weakness has been dialed into estimates. If it has, then this would be among the shortest and mildest downturns in many years."
- Notable gainers: SNDK +3.9%. MU +4.1%. AMAT +3.9%. TXN +4.7%. NXPI +3.9%. NVDA +3.5%. MXIM +4.7%. LLTC +5.1%. FCS +9.6%. FSL +8.8%. ADI +6.5%. TQNT +6.8%. RFMD +6.5%. ATML +5.9%. AVGO +5.1%. MRVL +4.7%. AMCC +8.9%. BRCM +3.6%. TSM +4.4%. ARMH +3.3%.
- Intel (INTC +3.5%) has recovered most of the losses it saw yesterday due to Intesil's (ISIL +3.3%) results and guidance, and related comments about a PC chip inventory correction.
- Chip ETFs: SMH, XSD, PSI, SOXL, USD, SOXS, SSG
Oct. 16, 2014, 7:31 AM| Comment!
Oct. 15, 2014, 5:30 PM
Oct. 10, 2014, 1:42 PM
- Following Microchip's warning and related prediction of a chip industry correction, Goldman's James Covello thinks there's 15%-20% downside in industry names.
- Covello, who lowered his industry view to Cautious in August: "The last time Microchip negatively preannounced was October 15, 2012 (3% sales miss). Between October 1 and December 31, Street 2013 sales estimates for the Semi group were revised down 6% on average."
- He adds several datapoints suggest the industry has been overheating. Among them: Semi revenue growth has outpaced end-market growth, and supply chain inventory dollars rose 3% more than their 3-year average in Q2.
- "Nobody will be spared," predicts Hedgeye's Craig Berger. Benchmark's Gary Mobley observes 5 of the 6 chip stocks to have made Q3 pre-announcements have thus done so to the downside.
- Worth noting: Mobile chipmaker Silicon Motion (SIMO -8.9%) is the one chipmaker to have positively pre-announced. It might not be a coincidence that Microchip has relatively low mobile exposure.
- Observing U.S. macro data remains positive even as China and Europe soften, Longbow's JoAnne Feeney remains bullish long-term on select names. However, she has cut her short-term rating on Linear (LLTC -3.8%) to Sell, and removed IDT (IDTI -7.1%) from her trading long list.
- In addition to the names previously mentioned, the following chip stocks are seeing steep losses: AMD -5.1%. FCS -13.6%. NXPI -11.2%. CODE -11%. LSCC -9.6%. SIMG -8.1%. IPHI -7.7%. ISIL -9.5%. CY -6.9%. RMBS -7.1%. QUIK -5.7%. SQNS -5.1%. IMOS -6.5%.
- Foundries and contract manufacturers are also selling off: TSM -3.9%. UMC -2%. SMI -2.4%. SANM -11.7%. FLEX -6.8%. JBL -4%.
- Chip ETFs: SOXX, SMH, XSD, PSI, SOXL, USD, SOXS, SSG
Oct. 10, 2014, 12:45 PM
Aug. 20, 2014, 11:51 AM
- Fairchild (FCS +2.5%), Intersil (ISIL +1.3%), Semtech (SMTC +2.6%) and Power Integrations (POWI +3.3%) have all given back a chunk of their early gains. Peer International Rectifier, which also rallied, has been halted.
- All 5 companies had jumped on a Bloomberg report stating Infineon is nearing a deal to buy a U.S. chipmaker for ~$2B.
Aug. 20, 2014, 10:15 AM
- Bloomberg reports Infineon (OTCPK:IFNNF) "nearing an agreement to acquire a U.S.- based semiconductor company for about $2 billion," and that a deal could be announced as soon as today.
- No word on whom Infineon is looking to buy. Bloomberg notes it reported last month analog/mixed-signal chipmakers Fairchild (FCS +5.6%), Power Integrations (POWI +11.3%), and Semtech (SMTC +8%) are considered M&A targets, as the chip industry continues to consolidate.
- Shares of all three companies are up sharply, as are those of peers International Rectifier (IRF +5.8%) and Intersil (ISIL +4.4%). FCS and IRF are currently worth $2B; POWI is worth $1.9B; ISIL is worth $1.8B; and SMTC is worth $1.7B.
- "[Infineon] would like to build a stronger presence in power management," says Liberum Capital's Janardan Menon. He adds the market has "high barriers to entry and strong growth prospects," a fact that also hasn't been lost on Texas Instruments and other industry players.
Jul. 17, 2014, 7:35 AM| Comment!
Jul. 16, 2014, 5:30 PM
Apr. 17, 2014, 7:36 AM| Comment!
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