Kaufman Bros Initiates Coverage on Cavium Networks (CAVM) with a Hold; Expect Steady Growth into Large Market Opportunity

November 30, 2009 5:18 PM EST

Kaufman Bros initiates coverage on Cavium Networks (NASDAQ: CAVM) with a Hold. Price target $22.

Kaufman analyst says, "Cavium is an emerging leader in the communications processor market, which is similar to PC microprocessors from Intel and Advanced Micro Devices, but focused instead on non-PC communications and consumer oriented equipment. We believe that CAVM's products address a market that is at least $3 billion in size, growing at a rate of +15%-20% Y/Y. While a smaller player today in this large market opportunity (CAVM LTM revenues of $91.3 million), we believe the company's recent track record of growing revenues at least twice as fast as the market is indicative of share gain traction. In 2010, we expect CAVM to again outpace the industry and grow revenue +37% Y/Y...We believe the key trends driving communications semiconductor demand are the need for increasing bandwidth and the ability to manage increasingly diverse packet data (i.e., data, video, voice, etc.). With increasing use of networks for voice over IP, video and mobile Internet access, we only expect these demands to increase and believe that CAVM's strong multi-core communications processors will benefit from this trend. We see the majority of CAVM revenues today being derived from multi-core products (more than 16 cores: 40% of revenues, 2-16 cores: 40% of revenues)...We estimate 4Q09 revenue and EPS of $29.5 million (+13.9% Q/Q) and $0.05, respectively. CAVM had a cash balance of $71 million at the end of 3Q09, represent $1.54 net cash per share, and no debt."

To see all the upgrades/downgrades on shares of CAVM, visit our Analyst Ratings page.

Cavium Networks Inc. designs, develops, and markets semiconductor processors for intelligent and secure networks.

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