Robertson Stephens Daily Growth Stock Update
Novellus Systems, Inc. (Nasdaq: NVLS) ($34.88)
F2000 EPS: $2.33 from $2.31
F2001 EPS: $3.32 from $2.86
Strong Buy
Sue Billat, Semiconductor Equipment/Foundries
"Novellus reported third quarter earnings-per-share of $0.62, in line with
the Street's estimates but missed our own 0.64 estimate," said Billat. "The company continues
to build record bookings and backlog. We believe the book- to-bill was in line with the front-end
industry average of 1.33 while backlog is exceeding the usual level of 1.5 times quarter
shipment. Accordingly, we expect fourth quarter sales to increase significantly as Novellus
ramps shipment to bring backlog down to more realistic levels. In our view, Novellus is
well-positioned to take advantage of macro trends such as the acceleration in copper adoption
and the transition to 300mm. We expect the company's low cost 300 mm PECVD tool Vector
to ship more than 100 units in the first half of 2001, more than twice the ramp of any prior
Novellus' tools. Moreover, based on our sources, Novellus' copper electroplating tool is
currently the tool of choice for a significant number of chipmakers. We are raising our fourth
quarter and 2001 earnings-per-share estimates. At 10.5 times our calendar 2001
earnings-per-share estimates, we believe Novellus is trading at a valuation unwarranted based
on the ramp of the Vector tool and copper, as well as the company's position at Intel.
Accordingly, we are reiterating our Strong Buy rating on the stock." |
