By IB Times Staff Reporter: Subscribe to IB's RSS feed
February 23, 2011 3:42 PM EST
Israel-based EZchip Semiconductor Ltd. (NASDAQ: EZCH) is an acquisition target for a handful of communication integrated circuit companies and could be a logical fit with Marvell Technology Group (NASDAQ: MRVL), an analyst at Benchmark Capital wrote in a note to clients.
"Marvell is earning a very low interest rate on its $2.7 billion in cash. Given EZchip's profitability and the minimal amount of interest income Marvell would forgo, we estimate Marvell could pay $43/share for EZchip and still drive accretion on a non- GAAP basis," said analyst Gary Mobley, who initiated the coverage of the company with a "buy" rating.
Based on the 27.13 million shares outstanding as of Dec.31 and the analyst's $43 a share estimate, EZchip could be valued at $1.17 billion. The company's market capital stands at about $734 million, with enterprise value at about $693 million.
In 2010, the company generated revenues of $62.0 million, an increase of 55 percent from last year and ended 2010 with a net cash of $101.3 million.
Like us on Facebook
Mobley said over the long-term, EZchip's revenue and EPS growth will likely benefit from growth in IP-based data traffic, increasing share gains within the overall network processors market.
With approximately 75 percent market share, EZchip is the leading merchant supplier of high-speed (>20Gbps) network processors (NPUs), which are key piece of silicon in carrier Ethernet switches and routers.
The served available market for high-speed NPUs should grow from $80 million during 2010 to $360 million during 2014, representing a compound annual growth rate of 47 percent.
EZchip is also set to benefit from a step-function increase in the company's served available market, resulting from the industry's transition to 100Gbps+ line speeds and an expanding gross margin due to high barriers to competition and an increasing mix of revenue coming from Cisco/Marvell.
Also, the analyst said the company's shares have corrected recently due to inventory rebalancing at key customers such as Cisco/Marvell and ZTE. In addition, investors have grown concerned about the rate at which EZchip's sales to Juniper will decline.
"As a result, we believe now is an excellent entry point for both short-and long-term oriented investors," Mobley wrote.
Mobley has a price target of $43 on EZchip stock.
Shares of EZchip were up 41 cents or 1.39 percent at $29.17 on Nasdaq.
Weak Eurozone Data, Greece Downgrade Hit Stocks: Daily Markets WrapIt didn't take long for the initial relief following Tuesday's long-awaited Greek bailout deal to die down.
Saffron Extract Benefits: 6 Reasons Why Dr. Oz’s Natural Weight Loss Aid Can Work for YouDr. Oz knows a thing or two about staying fit. On Monday, television's most popular doctor promoted a natural "miracle" appetite suppressant called saffron extract.
Who Won The Arizona Republican Debate 2012? [POLL]Who do you think won the Republican debate: Mitt Romney, Ron Paul, Newt Gingrich or Rick Santorum? Vote here to let us know.
iPad 3 Releasing on March 7? Doomsday for Kindle Fire and PlayBookApple's next generation tablet iPad 3, the successor to Apple's iPad 2, is expected to be launched on March 7.
We value your privacy. Your email address will not be shared.
Stocks to Buy for 2012: Picks from Hedge Fund Managers
![Ash Wednesday: Faces of the Faithful [PHOTOS]](http://img.ibtimes.com/www/thumb/mainpage/237365-15095-ash-wednesday-faces-of-the-faithful-photos.jpg)
