Needham & Company Reiterates Buy on Nova Measuring Instruments (NVMI) Following Announced Royalty Buyout Agreement
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Needham & Company reiterated a Buy rating and $14.00 price target on Nova Measuring Instruments (NASDAQ: NVMI) following the company's announced royalty buyout agreement with Israel's Office of the Chief Scientist.
Analyst Edwin Mok commented, "Before market open, NVMI announced that it signed a royalty buyout agreement with Israel's Office of the Chief Scientist (OCS), in which NVMI will pay $14 million lump sum to buy out of royalty liabilities of products developed under R&D grants from OCS. We believe this is a good use of cash as the liabilities are estimated to be around $24 million in total before tax benefits of the payment. The move will also potentially allow NVMI to have more flexibility in its long-term R&D planning as it is now not reliant on the OCS. While the detailed financial benefits are still being worked out, we see the move benefiting NVMI's bottom line through improved gross margins (permanently) and reduced tax rate (in the near-term). We believe the move will also increase financial flexibility for NVMI. Maintain our Buy."
Shares of Nova Measuring Instruments closed at $11.80 yesterday.
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