(By Balaseshan) Deutsche Bank analyst Bob Gujavarty initiated coverage of Silicon Motion Technology Corp. (NASDAQ:SIMO) with a "Buy" rating and $24 price target, saying the fabless semiconductor company is well positioned in high-growth markets.
Gujavarty believes Silicon Motion can deliver above market revenue growth through its strong position in flash controllers and LTE wireless solutions at Samsung Electronics (30% of revenue).
The analyst said SIMO's controller IP is increasingly differentiated in the market and underpins a trend of higher average selling prices (ASP). Even with a more muted outlook for SIMO's LTE wireless solutions in 2013 (down 3% year-over-year), he expects the company to continue to outperform its peers.
Gujavarty believes SIMO is well positioned in high-growth markets for flash controllers and LTE wireless solutions. It has successfully leveraged its relationship with Samsung Electronics (30% customer) to drive 225% growth over 2009-12.
The analyst believes SIMO's controller IP has become increasingly valuable and underpins a trend of higher ASPs. SIMO's high performance eMMC products should continue to support ASPs and revenue growth in Mobile Storage (up 18% year-over-year) even amid a more muted outlook for LTE wireless solutions (down 3% year-over-year).
Gujavarty remains optimistic that SIMO's LTE revenue will grow in 2013, but his visibility into Samsung's baseband roadmap beyond 2012 is limited.
The analyst expects SIMO's revenue growth to moderate in 2013 given continued headwinds in Mobile Communications (down 8% year-over-year), but Mobile Storage (up 18% year-over-year) should continue to see strong growth.
The brokerage established its 2012 EPS estimate of $1.78 on revenue of $284 million (up 27% year-over-year growth) and its 2013 estimate of $2.00 on revenue of $317 million (up 12% year-over-year growth).
SIMO is trading up 1.25% at $16.18 on Monday.