Lehman starts Saifun with Equal Weight rating
19.12.05 | 14:28 By TheMarker
Lehman Brothers today to cover Saifun Technologies with a lukewarm Equal Weight investment recommendation. It has little but praise for the company but notes its high multiple, and also points at the risks that include a high customer concentration: Macronix alone was responsible for 37% of turnover this year, and Infineon for 28%.
Analysts Tim Luke and Nadeem Janmohamed set a 12-month price target of $33 for the company, an innovative intellectual property vendor targeting flash memory with its patented NROM (nitride-read-only memory) technology. It has 55 U.S. patents on the technology, Lehman Brothers points out.
Saifun makes its living from licensing its technology. They profess to be impressed by the company's early traction and expect growth in the coming two years to be driven by penetration of its technology with its existing seven licensees.
The company did achieve 89% revenue growth this year compared with 2004, which is nice, and believe Saifun can add one or two more licensees by the end of 2007. If not more.
Its business model is highly profitable, and also encourages the adoption of NROM in the market for flash memories, which are compact little high-density memory devices for the likes of digital cameras and smart phones. Saifun's technology addresses a $21 billion market (that's the estimate financing round 2006), the analysts say, and it's working on upgrading its technological offering by doubling capacity.
For the year 2006, Luke and Janmohamed project that Saifun could increase revenues by 17% to $57.7 million, a figure that could increase if the Israeli company adds licensees.
For 2005 they predict earnings of $1.20 production share, and $1 in 2006 as share count increases. For 2007 they project $1.38 in earnings.
haaretz.com
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