Cavium (CAVM) Guidance Overshadows Major ThunderX Design Win - Needham & Company

Needham & Company analyst, Quinn Bolton, took out-year estimates down due to product transitions/disruptions in the base business and a more modest ramp of New Products. PT drops to $66 from $75 with Buy rating unchanged.

Estimate reductions overshadow the fact that CAVM secured its first production order for ThunderX from a major hyperscale data customer in Asia.

CAVM reported 1Q16 revenue and non-GAAP EPS of $101.9MM/$0.25, in-line with the midpt of guidance. Enterprise/ SP/DC revenue was $94.0MM, essentially flat Q/Q with access/SP up and enterprise/ data center markets down. BB sales were $7.9MM, up 5% Q/Q. Mgmt noted Nokia and Cisco were two 10+% customers in 1Q and accounted for 40% of total sales. NG GM was up 50bps at 67.1% due to favorable product mix changes and product cost reductions.

Mgmt guided 2Q16 revenue to be up 3-6% Q/Q to $105-108MM, below the $110MM estimate. Mgmt noted there was a 1-2 quarter delay in the deployment of wireless infrastructure at Reliance in India that will impact growth in its base business. NG GM was guided to increase ~50bps Q/Q due to favorable product mix and cost reductions. OPEX is expected to increase incrementally and be flat to up 1%. NG EPS was guided to $0.28-0.30, below expectations.

For an analyst ratings summary and ratings history on Cavium Networks click here. For more ratings news on Cavium Networks click here.

Shares of Cavium Networks closed at $57.72 yesterday.

You May Also Be Interested In

• Citi Upgrades United Microelectronics Corp (2303:TT) (UMC) to Buy 'with limited downside'
• Ameriprise Financial (AMP) PT Raised to $445 at Morgan Stanley
• Boston Scientific (BSX) PT Raised to $83 at Stifel