Citi Downgrades Fairchild Semi (FCS) to Sell

October 6, 2008 8:12 AM EDT

Citi downgrades Fairchild Semi (NYSE: FCS) from Hold to Sell. Price target $7.

Citi analyst says, "FCS is a classic gross margin leverage story. While management is making gradual strides in improving the business, rising input costs, disappointing new high-margin analog product ramps, extreme reliance on volume for margin leverage, and a price taker position suggest Street C09 EPS estimates need to come down by 50%. We model C09 revenue growth of -2.0% (Street +4.3%), gross margins of 28.7% (lowest level since C05; Street 31.1%) and EPS of $0.53 down 29% yy (Street $1.02). We expect in-line 3Q08 results, though expect our margin concerns to be born out in 4Q08 guidance. On lower multiples our target decreases to $7 from $13. Pare positions on macro or sector relief rallies."

Fairchild Semiconductor International, Inc. (Fairchild) is focused on developing, manufacturing and selling power analog, power discrete and certain non-power semiconductor solutions to a range of end market customers.

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