RFMD Revisited

Written by GSCR Staff   
Tuesday, 11 June 2013 09:04

In Monday’s Goldman Guide we discussed the consumer oriented gadget and technology focused millennial generation and investing ideas related to the tastes of this group.  One sector that is at the core of technology is the semiconductor industry, where there are a large number of players in the small cap universe.

Back in early April we highlighted RF Micro Devices (NASDAQ – RFMD - $5.28) at a price of $5.19 and a $7.00 target for sometime by the end of 2Q13.  The stock has not been able to break through the $6.00 level but we still like the story.

As a refresher, the company designs, develops, manufactures, and markets radio frequency (RF) components and compound semiconductor technologies primarily in the United States and Asia.  Its products are targeted at the 4G LTE mobile smartphones, wireless infrastructure, wireless local area networks, cable television /broadband, Smart Energy/advanced metering infrastructure and aerospace and defense markets.

RF continues to innovate in all product areas.  Recently, the company introduced the RFHA1027, a gallium nitride (GaN) matched power transistor (MPT) that will deliver industry-leading pulse power performance of 500W in a compact flanged package, very useful in applications like tablets and smartphones.  The firm was spending over 20% of total sales in research and development for several consecutive quarters finally tapering off in 2013, but still aggressively spending over 15% of sales on new products and programs related to R&D.

RFMD has a forward 12-month P/E under 10, and indication of a great value at the current price levels and forecasts.  The charts remain somewhat bearish side, but we think the fundamentals outweigh this indication.  The stock may not reach the $7.00 mark by the end of 2Q13, which is in 20 days, but we still like that target for year-end 2013.

Have a great day.

Disclosure: Goldman Small Cap Research analysts are neither long nor short these shares but may elect to purchase the stock within the next 48 hours.

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