It hasn't always been easy for CEVA (NASDAQ:CEVA). While the quality of this IP licensor's DSP technology has never been seriously questioned, the fact remains that Qualcomm (NASDAQ:QCOM) is a major competitive force in mobile baseband, and CEVA has seen significant volatility in recent years in its reported results as mobile partners have come under pressure or exited the industry entirely. Sentiment has definitely shifted, though, as the Street has come around to the significant revenue growth and margin leverage potential as the company's licensees gain share with much more lucrative LTE products and as the IoT market matures.
With the shares up about 75% over the past year, I would argue CEVA's valuation now incorporates a lot of the potential that was ignored just a year ago. A baked-in 16% long-term FCF growth rate isn't ridiculous or impossible, but it isn't what I would call "undemanding".
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Lofty Expectations Could Be CEVA's Biggest Threat