The share price of Ceva Inc. (Nasdaq:CEVA) has risen about 20% in the past few sessions following an upgrade from Northland Capital Markets on March 30. The price is currently at $26.10. Northland analyst Gus Richard raised his rating for the stock to "Outperform".
Ceva, headed by Gideon Wertheizer, provides solutions to the semiconductor industry. As a fabless company, its revenue derives from the sale of licenses to use its technology and from per-unity royalties on the final products..
Richard explains his upgrade by several factors: "Licensing remains strong in China as the country builds an indigenous industry; top tier cellphone OEMs like Apple are insourcing baseband designs; continued Apple/Intel phone royalties; 5G infrastructure exposure." Richard adds that "We expect the post Covid-19 world to use more contactless payments, voice enabled control and security camera based on Ceva IP," and mentions that Ceva's valuation is attractive in comparison with recent merger and acquisition activity in the semiconductor industry.
Despite some negative impact of the Covid-19 outbreak, particularly on the supply chain and an expected fall in demand that will depress royalty revenue in the second quarter, Northland is not reducing its forecast for licensing revenue or royalty revenue from base stations.
"There are few semiconductor IP vendors for cellular baseband, WiFi, and BT," Richard writes. "Ceva is seeing sustained demand from Chinese companies as the country invests to become semiconductor self-sufficient. In addition, in Q4 Apple signed a licensing deal for Ceva's 5G cellular baseband. We also expect some top tier Chinese OEMs to bring modem designs in house as well. Finally, Ceva is the only IP vendor that sells WiFi 6 IP another area of strong demand."
Ceva's market cap is currently $579 million.
Published by Globes, Israel business news - en.globes.co.il - on April 2, 2020
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