Sterne Agee CRT Starts Maxim Integrated Products (MXIM) at Buy; on Restructuring and M&A Potential

Sterne Agee CRT initiates coverage on Maxim Integrated Products (NASDAQ: MXIM) with a Buy rating and a price target of $40, saying they are positive on the company's restructuring initiative and see the company as a possible takeover target or consolidator.

"We like MXIM’s restructuring initiative, which is shifting focus and resources back to development of core analog products and technology," Douglas Freedman said.

He added, "We view the long-term benefits of cost savings and leading-edge analog process technology as more valuable than the market is presently applying given what we think is temporarily muted revenue growth."

The firm $40 price target is based on 14x our free cash flow estimate of $2.59 in calendar year 2016 plus balance sheet net cash of $3.28.

Freedman sees additional upside if MXIM were to merge with either larger or smaller peers in search of scale and sales synergies.

On a potential deal, the analyst said potential strategic buyers could be Analog Devices (NYSE: ADI), Texas Instruments (NYSE: TX), and Microchip (NASDAQ: MCHP) all seeking diversity and sale synergies. On the flip side MXIM could play the role of consolidator, adding both leverage and scale to expand their market presence.

For an analyst ratings summary and ratings history on Maxim Integrated Products click here. For more ratings news on Maxim Integrated Products click here.

Shares of Maxim Integrated Products closed at $32.99 yesterday.

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