RF Micro Devices, Inc. (RFMD)

[eastunder]

Kaufman Bros. Cuts Price Target on by 33% on RF Micro Devices (RFMD), Sees Margins at Lows

January 6, 2012 10:56 AM EST

Kaufman Bros. is maintaining its Buy rating on shares of RF Micro Devices (NASDAQ: RFMD), but is reducing its price target from $9 to $6 to reflect the company's new Q3 outlook.

For the third quarter, management now forecasts sales will total around $225 million, down 10 percent from the company's previous guidance of $250 million. The company claimed the lower expectations were due to "weakness in China 2G, as well as from Samsung component procurement seasonality, and broad weakness in its Multi-Market Products Group," reports Kaufman.

After factoring the weaker sales, inventory write-downs, and reduced utilization, gross margin looks to fall roughly 9 percent for the third quarter.

An analyst at Kaufman comments, "We believe that RFMD's gross margins are at or near a bottom as its normalized operating model may actually improve from a change in mix as its product cycles in converged power amplifiers, high efficiency power amplifiers, and high performance switches remain in front of the company."

For FY12 and FY13, the firm is lowering its EPS estimates from $0.40 and $0.65 to $0.22 and $0.36. Kaufman is also reducing its FY12 and FY13 sales estimates from $953 million and $1.153 billion to $887 million and $958 million.