UPDATE: Barclays Downgrades Cypress Semi (CY) to Equalweight
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(Updated - October 18, 2016 10:37 AM EDT)
Barclays downgraded Cypress Semi (NASDAQ: CY) from Overweight to Equalweight with a price target of $11 (unchanged). Analyst Blayne Curtis said GM progress is taking longer than expected and he sees risk into Q1.
"We continue to like CY’s long term potential, ~4% div yield, and increasing focus on the Automotive and Industrial end markets, but at this point it is clear the story is taking longer to play out than originally hoped (particularly on the GM front)," said Curtis.
"On the valuation front, speculation about possible M&A1 has boosted shares near term, but given the pace of improvement in underlying fundamentals, we believe it will take some time for the company to grow into its multiple. To get more positive, we would need to see clear signs of a meaningful pick up in revenue growth or the pace of GM improvement. Conversely, we see some risk from the recent BRCM IoT acquisition along with the possibility that broader end market conditions could slow and note that consensus estimates have March down just 2.6% vs. the historical average of 6%+," continued the analyst.
Curtis added, "M&A continues to be the most likely path to further appreciation in the near-term, and while it is hard to gauge the validity of published reports, we see a Chinese entity as the most likely buyer given CY’s low GMs and the Chinese national focus on growing the domestic semiconductor industry and recent track record of interest in similar assets (e.g. ISSI, etc.) Net net, we move to Equal Weight."
Shares of Cypress Semi closed at $10.73 yesterday.
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