Still Energized for Comstock
We are maintaining our Buy recommendation and raising our estimates and price target for Comstock Resources, Inc. (CRK) shares following the company's better-than-expected quarterly results. The out-performance was driven by production gains (up 25% year-over-year) and higher realized commodity prices (up 32% year-over-year).
We have raised our earnings estimates to reflect the quarterly gain and a higher commodity-price deck. Our new full-year 2008 and 2009 EPS estimates are $3.10 and $3.45, up from $2.25 and $2.60 before, respectively.
Additionally, the Bois d'Arc sale to Stone Energy Corporation (SGY) is expected to streamline Comstock's operations and position it to function as a pure-play onshore natural gas producer in addition to reducing exploration costs. The Haynesville Shale play offers significant long-term reserve-add potential going forward. In terms of growth potential (probable and possible reserves), the company's Haynesville Shale acreage is extremely prospective, providing reserve potential in excess of its current proved reserves.
Using these parameters, our per share net asset value estimate comes to $59.23. Comstock shares currently trade at roughly 80% of our net asset value estimate, highlighting the stock's value proposition. Our new $55 target price, raised from $40 before, reflects an updated net asset value estimate, using a higher commodity-price deck and adjustments to its year-end 2007 proved reserves tally for the Bois d'Arc transaction and other purchases/dispositions.
Applied Micro a Hold, Near-Term
Applied Micro Circuits Corporation (AMCC) recently reported revenues of $71.5 million in Q4, in-line with our estimate of $71 million. GAAP EPS was ($1.33). On a non-GAAP basis, EPS was $0.09, missing our estimate by a penny. Gross margin was down both on a GAAP and a non-GAAP basis.
On a product basis, processor revenues increased 11% quarter-over-quarter to $30.7 million driven by strong product shipments to the enterprise wireless access, 3G base station and packet processing applications. Transport revenues of $27.8 million were up 11% quarter-over-quarter.
However, storage revenues decreased 4% quarter-over-quarter to $13 million and contributed 18% of the total revenues. The Company has undergone a number of management and product transitions, which we believe should soon be positioned to enter a period of sustainable revenue growth as newer products move to production at key OEMs.
Going forward, management was conservative in its outlook and expects revenues to grow by 2%-4% sequentially. Gross margin is also expected to improve by 1%-1.5%. We believe AMCC is approaching an inflection point where revenue growth, which has been driven by a recovery back to a $70-$72 million per quarter run-rate, transitions to a sustainable and more consistent growth trajectory.
