Jefferies & Co. reiterated its hold rating on shares of CSR Plc (London: CSR) with a price target of 360 pence per share, ahead of the company's first quarter results on April 10.
The sentiment remains downbeat on CSR -- attempts to diversify the product base, Zoran Corp. (NASDAQ: ZRAN) have only confused investors. What is the long-term strategy now? Yet the promise of combo solutions (Bluetooth/WiFi/GPS/FM chips) loom next year as does new wins with GPS and WiFi, said Lee Simpson, an analyst at Jefferies.
Simpson expects sales of $166.4 million (consensus at $162.1 million), just above the midpoint of guidance ($155 million to $170 million). This better than seasonal quarter-over-quarter decline (10 percent) owes much to a difficult fourth quarter of 2010 (sales down 17 percent quarter-over-quarter), and on a year-over-year basis he sees first quarter of 2011 sales contracting down 4 percent.
Simpson said the company sees its handset segment (HBU) down 20 percent year-over-year, as the void in CSR’s product portfolio (combo chips) led to recent market share losses. It will be tough for CSR’s share price to re-rate if the robust growth in smartphones (45 percent year-over-year) remains a lost opportunity near term.
Added to that the recent hardships at Nokia Corp. (NYSE: NOK), and CSR8000 shipments upside in 2011 may subside. Yet, the 40nm product ramp looks increasingly de-risked (samples in second half of 2011; shipments first half of 2012) and bulls may look for upside elsewhere at CSR.
Simpson sees first quarter of 2011 year-over-year growth in Consumer and Autos (11 percent and 13 percent respectively), as BT volumes improve and SiRFstarIV (GPS) gains a new Tier1 design slot.
Elsewhere, we see underlying gross margin percentage of 48.3 percent as the product mix improves, and a slight rise year-over-year in underlying operating expenses make for 5.8 percent proforma operating profit percentage (ex. stock compensation and amortization). Our underlying EPS of 5 cents comes ahead of consensus estimates of 2 cents, said Simpson.
Simpson said that in the Zoran acquisition, the regulatory proceedings seem to be on track with the transaction set to close in June 2011.
CSR stock is trading down 0.70 percent at 352.50 pence on the London Stock Exchange at 8:50 am British Standard Time.