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Technology Stocks : ADI: The SHARCs are circling!
ADI 276.16-1.1%3:59 PM EST
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To: Doug Lakin who wrote ()12/2/1999 1:54:00 PM
From: Glen2   of 2882
 
Bear Stearns analyst Charles Boucher published a new report on ADI today. Key points include:

1. Analog Devices reported a blow-out quarter (FQ4) with EPS of $0.40 v. our (and consensus) estimate of $0.35. Growth was broad-based across all end markets and regions. We are raising our FY2000 EPS estimate to $1.99 and introducing our FY2001 EPS estimate of $2.56. We are raising our 12-month target price to $90 and upgrading our rating to Buy.

2. Communications was the fastest growing market, up 25% sequentially and 70% year-to-date. The greatest strength has been in broadband communications infrastructure equipment, with digital wireless handsets also showing solid growth. Communications now represents 40-45% or revenue, and is likely to exceed 50% in the coming year.

3. Bookings growth was strong throughout the quarter, and has continued through the month of November. Shippable backlog increased by 30% sequentially. While part of the strength could be driven by inventory or Y2K buffer stock accumulation, we believe Analog Devices' growth is more secure than most companies due to the dependence on broadband communications and new programs.

4. The company grew DSP revenue 26% sequentially and 83% year-to-date as it continued to capture DSP market share. Communications was the fastest growing DSP market, but the company continued to strengthen its position in the digital motor control marketplace.

5. Analog Devices is positioned to deliver very strong growth in 2000 and beyond, and should continue to deliver substantial operating leverage over the coming year. Much of the company's growth is from new products and new design wins, providing some reassurance that the company should not be strongly affected by an industry-wide inventory correction early in 2000. We believe the upside potential for the stock greatly outweigh the downside risk of an inventory correction. We are consequently upgrading our rating to Buy.
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