Hambrecht: Saifun decline is buying opportunity
"By year end both SMIC and Spansion will begin production of Quad bit NROM."
Globes correspondent 29 Jun 06 19:34
WR Hambrecht has released a report recommending flash technology company Saifun Semiconductors Ltd. (Nasdaq:SFUN) as a "Buy", with a price target of $38. This compares with a current stock price of $28.09, which gives the company a market cap of $871 million.
We had the opportunity to spend some time with Saifun's management over the past few days and view the recent pullback in the stock as a buying opportunity for long-term investors," write WR Hambrecht analysts Daniel Amir and Betsy Van Hees.
"We believe that by year end both SMIC and Spansion are to begin initial production of Quad bit NROM which would be a significant step towards validation of the technology, in our view. "
On the war of words between Saifun and M-Systems Flash Disk Pioneers (Nasdaq: FLSH) on the feasibility of the latter's four bits per cell flash memory technology, the analysts write, "We believe confusion continues to linger around M-Systems' x4 technology, which we view as a complementary, not competitive, technology to NROM."
Justifying their recommendation, the analysts say, "We continue to like Saifun Semiconductor for the following reasons: (1) winning IP business model which results in 78% GM and provides semiconductor investors a rare opportunity in investing in a company with a strong cash flow which is highly profitable, in our view; (2) strong customer base that includes a number of leading code and data flash players such as Spansion, Infineon, SMIC and Macronix; (3) flash technology leadership as the developers of NROM technology and the opportunity to license to additional data flash customers as floating gate technologies like NAND eventually hit a wall; (4) strong earnings and revenue leverage opportunity in 2007, as the company delivers revenue increases north of 40% and EPS of $1.37, in our estimation, (5) potential additional licensees in the next 12 months offer a favorable risk-reward scenario to inventors, and (6) attractive valuation, with a $38.00 year end price target which is 27x forward 2007E EPS estimate."
Published by Globes [online], Israel business news - www.globes.co.il - on June 29, 2006
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