FBR Capital Raises ATHR Target To $40

Recent checks suggest Atheros Communications, Inc. (NASDAQ: ATHR) is tracking in the upper half of 4Q revenue guidance (–9% to –11% QOQ) due to strength in handset and game console WiFi, optical networking in Asia, and with stability in PC WiFi, FBR Capital reports.

“For 1Q11, we think Atheros could guide revenues slightly better than the Street's $211M (–6% QOQ) as PC WiFi tracks better than seasonal and as consumer shipments likely stay robust on initial 2011 strength in Atheros' handset ROCm WiFi business, where we think the firm has seen solid design win momentum,” FBR Capital writes.

“Indeed, we believe Atheros can grow meaningfully from ramping WiFi ROCm into handsets (see analysis on next page), with the EPS contribution growing from $0.22 on ROCm in 2010 towards $0.70 in 2012.”

FBR Capital adds that given the factors mentioned above, a likely better-than-Street 1Q guide, and its view that management reset investor expectations, “we raise our financial estimates and price target on ATHR to $40 and highlight shares as an attractive 2011 growth investment opportunity.”

Atheros Communications currently trades at $34.84.