Microsemi Corp. (NASDAQ:MSCC) hasn't done that well since my last update on the company. While the shares were at least up in that intervening period, they've underperformed the PHLX Semiconductor Index by a little and particular names like Texas Instruments (NASDAQ:TXN), Semtech Corp. (NASDAQ:SMTC), and Silicon Labs (NASDAQ:SLAB) by a whole lot more. To a limited extent, maybe this is just "Microsemi being Microsemi" - I've owned and/or followed this name for a long time, and it always seems to zig when others zag. On the other hand, investors may be legitimately concerned about the level of debt the company has to manage now as well as the uncertainties regarding revenue, margins, and cash flows as the company moves through its initial stages of integrating PMC-Sierra.
My post-earnings model
adjustments lead to a lower fair value, which is bad, but I still
believe the shares are undervaluing what can be a strong mid-teens FCF
growth story for many years to come. With a fair value range from the
high $30s to the low $40s, I still think these shares offer enough
upside for investors to consider.
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When The Dust Settles, Microsemi Should Continue To Stand Out