FBR Capital Upgrades Atmel (ATML) to Outperform

FBR Capital upgraded Atmel (NASDAQ: ATML) from Market Perform to Outperform with a price target of $9.00 (from $8.50).

Analyst Christopher Rolland comments, "... we believe the nearly 30% sell-off in shares over the past few months, vs the S&P 500 up 2%, adequately discounts the majority of a modest semiconductor downcycle. While we were concerned by Microchip’s (MCHP – Not Rated) comments in its preannouncement, the prior language appears to have overstated the magnitude of the downcycle, as 4Q14 revenue was guided to be only “slightly weaker than seasonal.” We believe the Microchip whipsaw (“Microchipsaw”) provides investors with an opportunity to purchase select semiconductor stocks, and ATML in particular. Early this year, exiting CES 2014 (close to $9.00), we downgraded ATML shares since a number of growth drivers (XSense, PC Touch) appeared to have stalled. While we always appreciated the quality of the company’s core MCU business, valuation kept us sidelined. We believe that the recent sell-off values only the core business, with new opportunities (such as "crypto-memory") essentially “free options.” Also, the gross margin expansion story appears on track and should continue through 2015. Finally, Atmel remains our No. 1 acquisition target, as its manufacturing operations are now dated and as potential acquirers can benefit by internalizing MCU products in newer, more efficient facilities. Stepping back, we think the Street underestimates the true earnings power of (1) a longer-term cyclical recovery in the core MCU business, (2) a resurgence in maXTouch handset touch controllers (thanks to Xiaomi), and (3) new potential opportunities in crypto-memory."

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

Shares of Atmel closed at $6.95 yesterday.

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