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CIBC Reiterates Outperform: $25 target
by: peak_007
Long-Term Sentiment: Strong Buy 01/17/03 08:00 am
Msg: 26204 of 26251
They came out with a bullish report at 7:30 AM:
- We are maintaining our SO rating and 12-month $25 target in front of Zoran's
4Q earnings call January 30th. In our view, recent share weakness reflects
investor concern over upcoming 4Q results and 1Q guidance likely to be
discussed on the call.
- We expect ZRAN to post 4Q results in-line with our $42M and $0.22 estimates
(Consensus slightly lower at $40M and $0.20). We see volumes continuing to
meet/exceed expectations but speculate pricing may become more of a factor in
the seasonally weak 1H03.
- In our opinion, pricing pressures will be tempered somewhat by a transition
to higher-ASP/margin Vaddis 6 DVD chips (integrated front and back-end), which
is replacing the lower-ASP Vaddis 4 (which includes a low margin companion
chip).
- We continue to believe Consensus 2003 sales and EPS are achievable. ZRAN
trades near trough at 15x our '03 EPS, a meaningful discount to peers at 28x.
While valuation appears attractive and long term prospects bright, we see few
catalysts to spur the shares higher over the near term.
Our channel checks and US consumer data (compiled by CEA) indicate that
holiday-season sell-through of DVD players and sub-$200 digital cameras was
strong, sufficient to spur anticipated inventory restocking.
We believe Zoran could grow its market share in the upcoming year, as Vaddis
decoders further penetrate Samsung and Apex, while Japanese brands increasingly
hitch their recording wagons to Zoran's best-of-breed technology and coherent
roadmap (Vaddis 5R was in 4 of 6 DVD-recorders available this holiday season).
Our 2003 revenue estimate of $182 million could ultimately prove conservative
if DVD an end-market achieves projected 30%+ unit growth in 2003 (from 50M to
65M). Additionally, we expect silicon-content-per-DVD will increase in the
upcoming year, as MPEG-2 decoder chips integrate front-end functionality
(Vaddis 6), and sub-$300 DVD recorders (Activa 100) ramp during the holiday
season.
On the digital camera front, we expect to see solid revenue growth in 2003
(60%+), driven by declining price-points, improved performance, and increased
penetration at non-captive brands like Casio, Concord, Toshiba, Konica,
Minolta, and Kodak. To this end, we expect Zoran will announce new design wins
and roll-out its new COACH 6 image processor in conjunction with the annual
Photo Marketing Association show, in Las Vegas March 2-5.
We are reiterating our 12-month $25 price target, which equates to
approximately 24X our 2003 estimate. This is a discount to the company's
estimated 50% year-over-year earnings growth rate and below its peers at 28X.
good luck.
satorino
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