These aren't the best of times for the storage and carrier hardware industries, but PMC-Sierra (NASDAQ:PMCS)
is looking to leverage new product introductions, the move toward
software-defined networking in the data center, and a capex shift toward
optical transport networking (or OTN) equipment to drive a meaningful
upturn in revenue and further leverage in margins.
Mid-to-high
single-digit revenue growth and low double-digit FCF growth can support
today's stock price and the company's margins do argue for a higher
revenue multiple than today's level. It's also worth noting that
acquisition activity has picked up in the chip space and PMC-Sierra
would fit in with multiple suitors that have the wherewithal to make a
deal. I don't see a large discount to fair value here, but the company
has a legitimate opportunity to gain share in multiple markets and the
company is still of a size where a few extra points of market share can
drive meaningful extra value.
Follow the link for more:
PMC-Sierra Leveraged To High-End Product Cycles
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