Microsemi (MSCC) Price Target Raised Following Analyst Day

Microsemi Corporation’s (NASDAQ:MSCC) price target was recently increased by more than 13% to $52 from $46 by investment firm Needham & Company. Also, Stifel Nicolaus raised its price target by 4% to $50.00. Both firms reiterated their Buy rating on the stock.

Why the Price Rise?

Analysts at Needham and Stifel were impressed by the upbeat long-term outlook provided by management at its recent Investor Day held on Sep 9. Moreover, they have confidence in the company’s strong fundamentals and growth prospects.

At its Investor Day, Microsemi raised some of its long-term financial forecasts. It expects business to grow organically at 6–8% a year and revenues to increase more than $2 billion by 2020. The company also increased its gross and operating margins expectations to respectively 60%+ and 35% from60% and 30% projected earlier.

The company also reviewed a few key areas of growth. It now expects storage and data center, ethernet, precise timing ICs (integrated circuits), optical transport network processors, aerospace and FPGAs (field-programmable gate arrays) to be the catalysts to its growth.

The analysts at both Needham and Stifel are confident about the company meeting its targeted organic revenue growth. Moreover, the analysts are optimistic on the company’s near-term acquisition plans. They expect these new take overs to expand the company’s free cash flow over the next several quarters.

With Microsemi’s sustained focus on growth areas, sound fundamentals and strength within the semi space, analysts at both firms have a positive view on the company’s future success.

Conclusion

Microsemi Corp. is an OEM of a broad range of high-reliability and analog/mixed signal integrated circuits. We believe that its compelling products, scope for margin expansion, new design wins and solid execution will take it from strength to strength.

The company’s focus on improving product mix, operational efficiency and consolidation, will drive its revenues and gross margin in the second half of calendar 2016.

Additionally, Microsemi delivered an average positive earnings surprise of nearly 8.82% over the trailing four quarters. The company’s strong market position, its compelling product lines, strong revenue growth, continued innovation and long-term growth potential place it favorably in the market.

The company is expected to report fiscal fourth-quarter 2016 results on Nov 3.

Currently, Microsemi carries a Zacks Rank #3 (Hold).

Other Stocks to Consider

Some better-ranked stocks in the broader technology sector are Silicon Laboratories Inc. (NASDAQ:SLAB) , sporting a Zacks Rank #1 (Strong Buy), and Analog Devices, Inc. (NASDAQ:ADI) and Inphi Corporation (NYSE:IPHI) , carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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