Microsemi Rating Upgraded to Buy on Higher Sales Expectation

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Microsemi Corporation'sMSCC rating was recently upgraded to Buy from Neutral by investment firm Goldman Sachs & Co. Also, the firm issued a price target of $55.

Following the news, Microsemi'sshare price was up by 0.89% and closed at $47.75. In the last one year, Microsemi has outperformed the Zacks categorized Semiconductor - Analog and Mixed industry. While the stock returned 47.5%, the industry gained 44.1%.

We believe strategic positioning, strong fundamentals and efficient execution to be tailwinds for Microsemi.

Why the Rating Upgrade?

Mark Delaney, an analyst at Goldman Sachs, expects the sales figure to increase in the coming days, driven by growth in the company's end markets namely, Defense & Aerospace, Communications, Data Center and Industrial markets.

In the Defense & Aerospace market, Delaney expects increased spending and content gains in this market. In the last reported quarter, Defense & Aerospace generated 25% of sales, which was up 1% sequentially. Delaney said, "The 2018 U.S. defense budget proposal targets a 10% year-over-year spending hike."

With the defence and aerospace markets showing promise, the analyst believes Microsemi is well positioned to take advantage of this trend in the future.

Coming to the Communications market, Delaney expects strong growth in the company's optical networking products. The expectation is based on 100G metro/provincial build-outs in China and in the USA. In the last quarter, this market accounted for around 38% of revenues, which increased 6% sequentially and 5% year over year.

Also, the analyst expects Microsemi to win share gains in the Data Center market. He believes that Intel's INTC forthcoming server chip named Purley will increase the company's chip sales used in servers.

Moreover, the analyst remains impressed by Microsemi's cheap valuation in comparison to its peers namely Analog Devices Inc. ADI Broadcom Ltd. and Texas Instruments Inc. TXN

With Microsemi's sustained focus on growth areas, sound fundamentals and strength within the semi space, the analyst has a positive view on the company's future success.


Microsemi Corp. is an OEM of a broad range of high-reliability and analog/mixed signal integrated circuits. We believe that its compelling products, scope for margin expansion, new design wins and solid execution will take it from strength to strength.

The company's focus on improving product mix, operational efficiency and consolidation, will drive its revenues and gross margin through the second half of 2017.

Additionally, Microsemi delivered an average positive earnings surprise of almost 5.30% in the trailing four quarters. The company's strong market position, its compelling product lines, strong revenue growth, continued innovation and long-term growth potential place it favorably in the market.

The company is expected to report fiscal third-quarter 2017 results on July 27.

Currently, Microsemi has a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

Microsemi Corporation Price and Consensus

Microsemi Corporation Price and Consensus | Microsemi Corporation Quote

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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