Mobility Archive

AVGO: Delivers Strong Guidance on Upcoming Smartphone Builds (AVGO: BUY, $43 PT)

Posted May 30, 2013 By JoAnne

Avago delivered April results ahead of expectations and gave guidance above the Street. Guidance implies roughly $0.70 in EPS (non-GAAP, ex-SBC) for this quarter which is close to our prior of $0.71 and above Street at $0.68. We are reiterating our BUY and $43 price target.

  • Wireless results and outlook came in roughly where we expected as Apple builds declined, but Samsung picked up (Samsung was a 10%+ customer for first time last quarter) as did HTC (although HTC is suffering from component shortages – see prior post). China Mobile’s eventual move into 4G/LTE has apparently prompted orders for Avago components and the management noted that the interference caused by the proximity of the LTE band to the WiFi band calls for FBAR filtering. Our checks show that Apple and China Mobile remain in negotiations regarding their arrangement, but this may not stop Apple from moving forward on the product line. Also, we suspect Huawei as a customer for Avago for 4G models  and one with greater visibility toward the 4G/LTE rollout likely coming in 2H13.

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Filed in Analog, Mobility, RFICs

Comm Semi Update: Checks Show Continued Samsung Strength, Apple Inventory Clearing Ahead of New Model Launches (AVGO, SWKS, RFMD, TQNT)

Posted May 29, 2013 By JoAnne

Recent discussions with smartphone component suppliers indicate that 2Q shipments are likely to rise 5-10% Q/Q, in line with previous expectations, on new model launches. Shipments in 3Q are expected to pick up further momentum (up 15%+) as Samsung follows the S4 with more varied model launches and as low-cost iPhone builds commence.  Smartphone growth for 2013 is expected to reach 30%, led by emerging market demand for low- to mid-range models.

Our checks suggest that companies disproportionately exposed to Apple face downside risk to June quarter results, but increasing diversification protects key component suppliers such as BUY-rated AVGO, SWKS, RFMD, and TQNT. Also, ramp of Samsung models is proceeding in line with expectations and September quarter looks to combine strength in additional Samsung ramp with new Apple models.

Avago appears likely to turn in a slightly weaker-than-expected April quarter when it reports this evening, but we see guidance ahead of expectations on our checks showing strong mid-year smartphone component demand from Samsung and late-quarter iPhone initial builds. The pace of shipments should pick up further in Avago’s October quarter when ongoing Samsung builds coincide more fully with iPhone ramps. Also, while Wireline component orders remained cautious for the April quarter, the gradual return of spending signaled by Cisco and several analog providers suggest Wired and Industrial growth in July and October quarters. We are reiterating our BUY and $43 price target.

Asia Smartphone Checks & Avago Preview:

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Filed in Analog, Mobility, RFICs | Tagged: , , , , , ,

IDTI: New Products, Cost Cutting, and Limited Downside Risk: Upgrading to BUY

Posted May 23, 2013 By JoAnne

Upgrading on Growth Potential: We see further upside to IDTI’s performance, following discussions on enterprise flash and wireless charging with industry contacts. We are raising our rating to BUY and setting a $10 12-month target price (19x FY14 EPS) as new products are positioned to drive growth in 2H and consensus estimates appear too conservative given our checks.

Operating margin came in at 6% last quarter, but through gross margin expansion (volume, mix) and cost cuts, the company sees its goal of 20% by F4Q14 (March 2014) as “ambitious but achievable” if revenues approach $130M and gross margin climbs to ~60%.  Most are not expecting IDTI to reach this goal and appear to be discounting  that target by nearly one-quarter. But if management were to achieve this, it would push earnings well ahead of our and consensus expectations and the corresponding improvement in free cash flow would, we believe, further propel valuations.

  • Our discussions with industry contacts suggest that enterprise flash is building momentum and point to IDTI’s advantages from its PCIe expertise  and while we see a slow roll out of wireless charging solutions, we see IDTI well positioned regardless of the identity of the winner in the standards battle.
  • We have completed a product-oriented breakdown of revenue drivers for IDTI to assess its potential for growth over the next two years and have found room for the company to outperform current market expectations.
  • Besides recovery in Communications and some growth from SRIO, we see the major drivers in Computing and Consumer (early wireless charging revenue here).  We see Computing revenues of $158M and $172M in FY14 and FY15, respectively, driven by our assessment of the Enterprise flash products; we see Consumer growing from $67M in FY13 to $76M in FY13 and $88M in FY14. But our research also suggests upside from these sources of ~$30-40M in FY15.

Key Growth Drivers: We focus here on the new product drivers for growth for IDTI, but fully expect continuing, though gradual, economic recovery to help its core businesses to move up from recent lows.

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Filed in Analog, Data Center, Memory, Mobility

AVGO: FBAR Filters With a Long Future (BUY: $43 Target)

Posted May 17, 2013 By JoAnne

The deployment of LTE/4G is only the first of many changes in wireless technology that we expect to raise demand for Avago’s FBAR filters in coming years. Already, we are seeing Avago benefit from its success in iPhones and from growing traction at Samsung. Coverage this week of Samsung’s progress in developing 5G technology, while a headline grabber, primarily indicates that 4G/LTE technology will be filling phones for many years to come.

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Filed in Mobility | Tagged: , ,