10:41AM Silicon Laboratories (SLAB) 56.91: Morgan Stanley downgrades SLAB to Equal-Weight from Overweight based on valuation, as the stock is now trading at a slight premium to some of the best companies under coverage, and the potential for a more noisy competitive environment in the wireless market, suggesting additional multiple expansion will be difficult to sustain. Maintains $65 target.
What It Means:
At Morgan Stanley, an Equal-Weight rating reflects the analyst's expectation for the stock's total return to be in-line with the average total return of the analyst's industry coverage universe, on a risk-adjusted basis, over the next 12-18 months.
The downgrade highlights valuation concerns, which have plagued the market of late, particularly the technology sectors. As a result, today's downgrade, especially coming from a top-tier firm such as Morgan Stanley, is likely to pressure the stock in today's session.
This is the first downgrade of the stock since early December versus as many as 6 upgrades in the same period of time. Including today's ratings change, Multex shows the current ratings distribution having 4 analysts with an equivalent of a Buy rating, 4 analysts with an equivalent of an Outperform rating, 3 analysts with an equivalent of a Hold rating, and 1 analyst with an equivalent of a Sell rating, leaving plenty of room for further downgrades.
Despite the downgrade, the firm says execution and earnings results should remain solid, as SLAB continues to be a solid long-term growth story. While the firm expects near-term earnings upside surprises to become smaller, says results should continue to have upside potential. Additionally, the price target of $65 reflects 14% upside potential from current levels. These factors are likely to mitigate the impact of the downgrade. -- Victoria Glikin, Briefing.com |
