Citi Upgrades LTX On Strengthened Relationship With Texas Instruments

| About: LTX Corp. (LTXX)

Semiconductor test gear provider LTX Corp. (LTXX) Thursday morning cut guidance for its fiscal fourth quarter ended July 31, citing “continued weakness in the semiconductor test equipment industry.” LTX now sees revenue of $30 million, down from previous guidance of $33 million to $35 million. The company now sees a loss per share of 7-8 cents; it had been expecting a loss of 4-6 cents.

LTX also said that “industry conditions remained flat through the end of July,” and that it expects revenue for the October quarter to about flat sequentially, at $28 million to $32 million. The Street had been looking for October quarter revenue of $38.7 million.

Meanwhile, Citigroup’s Timothy Arcuri Thursday morning raised his rating on the stock to Buy from Hold. “While a lack of orders from Texas Instruments (NYSE:TXN) is the near-term issue, given current valuation, we feel the only way this stock goes meaningfully lower would be if LTXX began to lose share at this large customer” (he notes that Texas Instruments accounts for about 50% of LTX’s revenues) .

While we have historically felt that there was risk to LTXX’s share at TXN, we now feel the relationship has strengthened recently, new products have been very well received, and TXN should start ordering more testers later this year.

With the stock trading at about 1x enterprise value/sales and about 1x tangible book value, he says “further downside appears unlikely.” He says a trade back to $5 over the next 12 months “is likely.” That would be a nice return.

LTXX 1-yr chart:
ltxx chart

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