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UPDATE: Altera (ALTR) PT Lifted to $38 at Northland Capital Markets; Speculates on Intel (INTC) Takeover

December 11, 2014 8:16 AM EST
Get Alerts ALTR Hot Sheet
Price: $85.90 -0.43%

Rating Summary:
    8 Buy, 5 Hold, 0 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 13 | Down: 11 | New: 11
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(Updated - December 11, 2014 8:23 AM EST)

Northland Capital Markets analyst Gus Richard boosted estimates and his price target on Altera (NASDAQ: ALTR) to $38.00 (from $32.00) following 2015 guidance from the company but stopped short of upgrading the stock and maintained a Market Perform rating.

Richard commented, "We are increasing our earnings estimate for CY15 from $1.60 to $1.75 on unchanged revenue of $2.06B. We increase our GM slightly on a favorable mix, and lower our R&D and interest expense. A slight offset to this is a higher tax rate. While our EPS estimate increases 9% for CY15, consensus is likely unchanged."

In a separate report, Richard said they have long held the belief that Altera would be a good takeover target for Intel (NASDAQ: INTC). According to the analysts, "ALTR addresses a $5B market that would be an incremental opportunity for INTC. In addition, process technology is a significant factor for an FPGA vendor. Intel has a significant lead in process technology. Moreover, four out of the six announced INTC foundry partners are FPGA suppliers. ALTR is the largest of these foundry customers and their technology road maps are aligned. Intel is also shipping ALTR’s FPGA with its server chips to data center operators like the NSA, Google, Microsoft and Baidu. FPGA are used in data center applications for executing mathematical algorithms like encryption, search and compression. FPGA’s are far more efficient than a general purpose CPU executing these algorithms. In addition, INTC continues to push into the communication business and 45% of ALTR’s revenues come from wireline and wireless communication."

A merger would be could for ALTR as R&D has risen from 13.5% of revenue in CY10 to 22% of revenue for CY14. The firm sees continued upward pressure on the company's R&D budget as complexity increases as Moore’s law continues. ALTR could leverage a significant amount of Intel's design IP, the analyst said. In addition, we believe that ALTR has had a difficult time using INTC as a foundry.

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

Shares of Altera closed at $37.14 yesterday.



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