Investment house Chardan Capital Markets predicts that TowerJazz (Nasdaq: TSEM; TASE: TSEM) will reach the high end of its guidance range for the first quarter. The specialty foundry will publish its financial report for the first quarter on May 12. Chardan analyst Jay Srivatsa agrees with the market consensus that TowerJazz will report non-GAAP earnings per share of $0.13 on $112.5 million revenue for the first quarter.
Srivatsa reiterates his "Buy" recommendation for TowerJazz with a target price of $3.
Srivatsa bases his bullish revenue forcast on strong results by several TowerJazz customers, including RF Micro Devices Inc. (Nasdaq: RFMD) and Atheros Communications Inc. (Nasdaq: ATHR). He said that he expects TowerJazz to provide numbers about recently signed agreements with Tego Inc. and VectraWave SA, as well as plans to boost production capacity.
However, the analyst also said that TowerJazz's debt load has to be dealt with. "In particular, we would be looking for the company to speak to the steps it is taking to reduce its debt," said Srivastra. He believes that with $80 million in cash, the company has several options to lower its debt, and adds that its debt ratio of about 700% is a major overhand on the stock.
Srivatsa believes that the analysts' estimates for TowerJazz's second quarter results may be conservative. "Coming off a strong quarter, we expect the company's business to remain strong in the second quarter, as several customers have indicated continued growth." He expects that company to offer second quarter revenue guidance of $122-125 million, above his forecast of $121.5 million. He also forecasts non-GAAP earnings per share of $0.14.
Srivatsa believes that TowerJazz will reiterate its full-year revenue guidance of $500 million.
Chardan initiated coverage of TowerJazz in February, because it believes that the company is a "good turnaround story poised to achieve GAAP profitability in the third quarter."
On a separate matter, on May 20, TowerJazz will host it first Global Symposium in Seoul, Korea. The one-day event will focus on the company’s range of process technologies and design enablement capabilities, and include a keynote speech from CEO Russell Ellwanger.
Ellwanger said, "The Korean region is home to many highly skilled IC designers and industry leading semiconductor companies, among which we have and continue to develop strong business partners."
Tower's share price fell 2.9% on Nasdaq yesterday to $1.32, giving a market cap of $262 million. The share price jumped 7.5% by midday today on the TASE to NIS 5.33.
Published by Globes [online], Israel business news - www.globes-online.com - on May 6, 2010
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