UPDATE: Northland Capital Markets Starts PMC-Sierra (PMCS) at Outperform

(Updated - December 9, 2014 8:34 AM EST)

Northland Capital Markets initiated coverage on PMC-Sierra (NASDAQ: PMCS) with a Outperform rating and a price target of $13.00. Analyst Gus Richard thinks growth is at an inflection.

"PMCS revenues peaked in FY11 as its legacy optical networking product entered a steep decline and pricing pressure increased the Pass Optical Networking (PON) market. These pressures have subsided as legacy optical products have declined to 5% of revenue in FY13 and PON revenue is now roughly 6% of revenue. We expect new storage, OTN and wireless infrastructure radio head products to drive revenue growth and operating leverage going forward. Moreover, we believe the company is committed to expanding its operating margin, and if growth does not resume the company will reduce cost to drive operating leverage," said Richard.

"We believe the company is well positioned for a return to growth over the next couple of years as the company’s product portfolio is targeted primarily at the hyperscale data center market. In addition, Avago recently acquired PMCS’ primary competitor in the storage market, LSI Logic. This is likely to be disruptive to LSI as companies are integrated and pieces of LSI are sold off to Intel and others," he added.

For an analyst ratings summary and ratings history on PMC-Sierra click here. For more ratings news on PMC-Sierra click here.

Shares of PMC-Sierra closed at $8.61 yesterday.

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