Wedbush Cuts Price Target on Cavium (CAVM) Following Announced QLGC Acquisition
Wedbush maintained an Outperform rating on Cavium Networks (NASDAQ: CAVM), and cut the price target to $51.00 (from $68.00), following the company's announced plans to acquire QLGC. CAVM expects the deal to close in Q3:16, be accretive to 2017 pro forma EPS by $0.60 to $0.70, add $400MM to $410MM in annualized revenue with strong profitability and CF generation.
Analyst Betsy Hees commented, "We maintain our OUTPERFORM rating as we see the longterm rational in the deal providing CAVM will scale, $400MM to $410MM in annualized revenue, and $0.60 to $0.70 of pro forma EPS accretion in 2017, but we are reducing our PT to $51 from $68 as we believe the growth profile of CAVM has changed and in our view no longer supports the premium multiple valuation that CAVM has enjoyed since it became a public company. Our new 12-mos PT of $51 is based upon our 19x (from 29x) our 2017 pro forma EPS estimate of $2.70 for the combined ($2.05 - CAVM and $0.65 - QLGC) company."
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Shares of Cavium Networks closed at $48.00 yesterday.