Microsemi (MSCC) Replaces NXP (NXPI) as Top Pick at Suntrust
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SunTrust Robinson Humphrey maintained a Buy rating on Microsemi Corporation (NASDAQ: MSCC) with a price target of $51. The stock was also named as the bank's new Top Pick, replacing NXP Semiconductors (NASDAQ: NXPI). Analyst William Stein said he sees 58% upside if the company is acquired.
"Following the recent rise in NXP's stock price on the heels of a series of reports that the company is the target of a pending acquisition by Qualcomm, we transition our Top Pick to Buy-rated MSCC," said Stein.
"We envision three ways for investors to profit in MSCC: (1) if the company generates organic growth (even below its 6-8% target) it will deliver significant EPS growth, lower financial leverage, and should be rewarded with a higher P/E multiple; (2) if the company pursues another acquisition after achieving 3.0x leverage (we estimate in the December timeframe) it will not likely achieve P/E multiple expansion, but will benefit from higher EPS estimates; (3) if the company is acquired, which management has openly discussed, an average EV/Sales and EV/ EBITDA multiple imply a $60 stock price, or 58% upside potential. Meanwhile our stand-alone PT is $51," added the analyst.
Shares of Microsemi Corporation closed at $40.24 yesterday.
(Correction in headline)
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