MKM Comments On Semiconductors, Says This Is Still The 'Golden Age' Of Radio Frequency

In a report published Tuesday, MKM Partners analyst Ian Ing argued that any near-term weakness in Radio Frequency (RF) names represents a buying opportunity as RF names remain a relative value, trading at a discounted multiple to the S&P 500.

"While we agree with consensus opinion that China has some present weakness, we see this as largely a low-end domestic mass-market phenomenon," Ing wrote. "Our checks suggest offsets via a combination of export markets (i.e., world phones with robust RF needs) and online sales channels that replicate XiaoMi Inc."

Ing said that the intense competitive environment and average selling price pressures in digital chip sets do not apply to RF. In fact, RF requirements and complexity continue to go up in the shift to higher-end and globally compatible phones.

Related Link: Short Interest In Semiconductor Stocks Soars

Estimate Changes

Ing made the following estimate revisions:

• Skyworks Solutions Inc (NASDAQ: SWKS) fiscal 2015 revenue estimates were raised to $3.196 billion from $3.184 billion while earnings per share estimate was raised to $4.94 from a previous $4.91.
• Qorvo Inc (NASDAQ: QRVO) fiscal 2015 estimates remain unchanged. The analyst is projecting the company to report revenue of $1.6975 billion and earn $1.54 per share.
• Avago Technologies Ltd (NASDAQ: AVGO) fiscal 2015 revenue estimates were raised to $6.813 billion from $6.774 billion while earnings per share estimate was raised to $8.47 from a previous $8.24.

Price Target Changes

• Shares of Skyworks Solutions remain Buy rated with a price target raised to $116 from a previous $86.
• Shares of Qorvo remain Buy rated with a price target raised to $95 from a previous $87.
• Shares of Avago Technologies remain Buy rated with a price target raised to $148 from a previous $130.