UPDATE: D.A. Davidson Downgrades TriQuint Semiconductor

D.A. Davidson downgraded TriQuint Semiconductor (NASDAQ: TQNT) from Buy to Neutral and maintained a $27 price target.

Analyst Thomas Diffely commented, “While our bullish model and positive outlook on the pending merger with RF Micro Devices remains intact, we believe the robust stock outperformance (210 percent year-to-date return) largely reflects the more positive margin and synergy targets that management outlined at the recent Qorvo analyst meeting.”

“The pending merger remains on track to close on December 31, 2014, and we believe the $150 million in post-merger cost reductions two years after the close ($75 million by the end of year 1) is achievable. Two years after the close, management targets an operating model with 50 percent gross margins, 20 percent operating expenses, 30 percent operating margins, and a 10-15 percent tax rate,” according to Diffely.

The analyst note concluded that with a “back of the envelope calculation, and assuming roughly 15 percent revenue growth in each of the next two years, we get around $3 billion in revenue in 2016, ~$900 million in operating income, and ~$750 million in net income. With a projected 150 million shares outstanding this would drive EPS of ~$5.00.”

TriQuint Semiconductor recently traded at $25.04, down 3.3 percent.