Needham & Company Reiterates Buy on Cavium (CAVM) Following QLogic Acquisition
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Needham & Company reiterated a Buy rating and $66.00 price target on Cavium Networks (NASDAQ: CAVM) following the company's acquisition of QLogic. CAVM paid $11.00 in cash and 0.098 share of CAVM stock for each QLGC share, representing total consideration of ~$1.40B assuming a CAVM share price of $50.37.
Analyst Quinn Bolton commented, "We are raising our CAVM estimates to reflect the acquisition of QLogic now that the transaction has closed. In aggregate, we forecast QLGC will add $420MM of revenue and $0.70 of NG EPS to 2017 estimates, at the high end of management's prior NG EPS accretion target of $0.60-0.70. Our model assumes the combined entity realizes $40+MM of annualized synergies by 4Q17 (slightly below the $45MM target set by management.) In addition to increased earnings, cash flow and scale, we continue to believe the QLGC transaction brings to CAVM proven adapter card software protocol stacks and strong customer relationships with server and storage equipment OEMs. We reiterate our Buy rating and $66 PT based on our DCF analysis."
Shares of Cavium Networks closed at $55.44 yesterday.
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