MIPS Technologies (MIPS)

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MIPS Rallies As Capstone Boosts Rating To Buy


MIPS Technologies shares are getting a boost this morning from Capstone Research analyst Jeff Schreiner, who lifted his rating on the chip maker’s shares to Buy from Hold, setting a $7 target price. The stock closed Monday at $5.46.

Schreiner advises investors to “look through the eyes of potential private equity, or a potential acquirer, and what value may be overlooked within MIPS.” He contends that “strong potential free cash flow generation, plus [a] restrained spending environment due to activist investors and cash balances imply a much higher potential value for MIPS and its royalty based revenue stream.”

Schreiner says he recommends investors buy the stock “due to potential disconnect” in the value of cash plus the company’s royalty stream compared with the current market valuation.

The analyst also notes that the activist investment firm Starboard Value recently disclosed a 9% stake in the company, and will likely be pressuring MIPS for expense reductions. “If MIPS were to reign in spending significantly,” he writes, the company could see a positive boost in free cash flow.