Following better than expected first quarter results by independent foundry TowerJazz (Nasdaq: TSEM; TASE: TSEM), investment bank Chardan Capital has raised its 12-month target price for the company to $3.10, and reiterated its "Buy" recommendation.
Chardan notes that TowerJazz beat the analysts' revenue and non-GAAP earnings per share consensus for the first quarter, and that increased capacity utilization by the company boosted its gross profit margin to 43.3% from 38.5% in the fourth quarter. Chardan also pointed to TowerJazz's comment that its fabs are running at high utilization and that the company is expanding capacity at its fabs as well as exploring asset acquisitions to further boost its capacity.
Chardan said that TowerJazz's second quarter revenue guidance of $123-128 million is above the analysts' forecasts, including Chardan's forecast of $121.5 million. TowerJazz also predicts that it could exceed its full-year 2010 revenue target of $500 million and its target of earnings before interest, taxes, depreciation and amortization (EBITDA) of $160 million.
Chardan added that TowerJazz increased its cash position to $83 million at the end of March from $80 million at the end of 2009, and that it reduced its debt to $405 million from $429 million over the same period, which lowered its debt to equity ratio to 619% from 754%.
Chardan therefore raised its second quarter revenue forecast for TowerJazz to $125.2 million from $121.5 million, and its non-GAAP earnings per share forecast to $0.15 from $0.14. It also raised its full-year revenue forecast to $505 million from $498 million, and its non-GAAP earnings per share forecast to $0.60 from $0.55.
Chardan concludes, "We view TowerJazz as undervalued."
Tower's share price fell 4.5% on Nasdaq on Friday to $1.49, and it fell 5.5% by midday on the TASE today to NIS 5.68, as part of the general markets tumble.
Published by Globes [online], Israel business news - www.globes-online.com - on May 16, 2010
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