Wedbush Upgrades Silicon Motion Technology (SIMO) to Neutral; Adjusts Estimates & PT

October 15, 2009 8:49 AM EDT

Wedbush upgrades Silicon Motion Technology Corp. (Nasdaq: SIMO) from Underperfrom to Neutral. Price target increased by $1 to $4.50.

Wedbush analyst says, "We are upgrading Silicon Motion Technology to a Neutral following our recent round of industry checks that indicate supply of NAND flash appears to be improving. As a derivative unit play to the NAND market, we expect Silicon Motion’s business to increase Q/Q due to improving supply of NAND flash and seasonal trends. We believe that the worst of times are likely behind the company and shares will no longer underperform, relative to our coverage universe. We believe the near-term fundamentals for the company are improving due to (1) a return to unit growth in its Mobile Storage business, (2) improving supply of NAND, and (3) tempering in ASP declines due to process node migration of NAND. While we are incrementally more positive on the near-term outlook for the company, we remain cautious on the 1H of 2010E given our expectations for the company to experience a typical seasonal decline in Q1."

"We are increasing our 2010 pro forma gross margin estimates to 48.5% up from 47.1% due to better product mix of Mobile TV products. We are reducing our OpEx estimate to $51.4MM (from $53.5MM) due to continued tight cost controls. We are increasing our 2010 pro forma EPS estimate to $0.05 from break even due to better GM and lower OpEx. We are lowering our revenue estimate for 2010E to $106MM (19% Y/Y growth) down from $108MM largely due to our expectation that the company will experience typical Q1 weakness of down 10+% Q/Q vs. our prior estimate of down 5+% Q/Q."

To see more analyst ratings on SIMO Click Here.

Silicon Motion Technology Corporation, a fabless semiconductor company, together with its subsidiaries, designs, develops, markets, and supplies semiconductor solutions for the multimedia consumer electronics market.

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