FBR Capital Maintains a 'Market Perform' on Silicon Labs (SLAB); Low Margins a Near-Term Negative As We Await a Proper Entry Point
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Price: $218.41 +0.05%
Rating Summary:
10 Buy, 19 Hold, 2 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 13 | Down: 14 | New: 11
Rating Summary:
10 Buy, 19 Hold, 2 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 13 | Down: 14 | New: 11
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FBR Capital maintains a 'Market Perform' on Silicon Labs (NASDAQ: SLAB), PT $42.
FBR analyst says, "Silicon Labs reported mixed 1Q11 results and 2Q11 guidance as below-model gross margins of 61.6% (versus model of 62%–65%) are an incremental negative. That said, Silicon Labs has ramped its lower-margin LCD TV tuner and demodulator products above 10% of revenue, and the firm has a plan to cost reduce these still immature products. Thus, 2H11 gross margins should improve in video and as higher-margin broad-based shipments make up more of the mix. Indeed, Silicon Labs is performing well in its broad-based business as new design wins mount in MCUs and timing in particular, and with nascent growth opportunities in human interface and short-range wireless."
"Stepping back, we remain believers that Silicon Labs' proprietary product offering and immense engineering talent are likely to translate into substantial revenue and earnings growth in coming years, possibly growing toward $1B in annual revenues and $3.50 of EPS, including stock compensation expense, and thus arguing for an eventual $85 stock at a 20x P/E. This scenario is not near term, however, and the stock is expensive on current earnings (2011 P/E of 30x, 2012 P/E of 21x); we thus await a more attractive entry point under $40."
"We slightly cut our 2011 pro forma EPS estimate from $2.10 to $2.05 (excluding stock compensation) and our 2012 estimate from $2.75 to $2.65."
For more ratings news on Silicon Labs click here and for the rating history of Silicon Labs click here.
Shares of Silicon Labs closed at $43.81 yesterday.
FBR analyst says, "Silicon Labs reported mixed 1Q11 results and 2Q11 guidance as below-model gross margins of 61.6% (versus model of 62%–65%) are an incremental negative. That said, Silicon Labs has ramped its lower-margin LCD TV tuner and demodulator products above 10% of revenue, and the firm has a plan to cost reduce these still immature products. Thus, 2H11 gross margins should improve in video and as higher-margin broad-based shipments make up more of the mix. Indeed, Silicon Labs is performing well in its broad-based business as new design wins mount in MCUs and timing in particular, and with nascent growth opportunities in human interface and short-range wireless."
"Stepping back, we remain believers that Silicon Labs' proprietary product offering and immense engineering talent are likely to translate into substantial revenue and earnings growth in coming years, possibly growing toward $1B in annual revenues and $3.50 of EPS, including stock compensation expense, and thus arguing for an eventual $85 stock at a 20x P/E. This scenario is not near term, however, and the stock is expensive on current earnings (2011 P/E of 30x, 2012 P/E of 21x); we thus await a more attractive entry point under $40."
"We slightly cut our 2011 pro forma EPS estimate from $2.10 to $2.05 (excluding stock compensation) and our 2012 estimate from $2.75 to $2.65."
For more ratings news on Silicon Labs click here and for the rating history of Silicon Labs click here.
Shares of Silicon Labs closed at $43.81 yesterday.
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