07:25am EDT 18-Sep-98 CIBC Oppenheimer (Dale R. Pfau 415-434-5871) VTSS
VTSS: Reiterate Strong Buy; Fundamentals Intact
CIBC Oppenheimer
September 17, 1998
Telecom Infrastructure/Wireless Vitesse Semiconductor
Dale R. Pfau (415) 434-5871 Reiterate Strong Buy;
Lior Bregman (212) 667-7045 Fundamentals Intact
Earl Lum (415) 434-5877
Investment Conclusion
We continue to rate the shares of Vitesse Rating: STRONG BUY
Semiconductor a Strong Buy with 12 - 18 VTSS-OTC(9/17/98) $23 9/16
month price target of $45-$50 per share. 52-week $37 3/16-13 5/16
Shares Out 79 Million
The shares of Vitesse have been under heavy Float 68 Million Shares
pressure this weak stemming from the recent Market Cap $1.9 Billion
announcements from Ciena Corp., Tellabs,and Div/Yield Nil/Nil
Alactel Alstrom,that revenues and earnings Fiscal Year September
may be weak for the current quarter. There Book Value $3.93 per Share
have also been rumblings about overall FY 1998E ROE 18.6%
weakness in some segments of the LT Debt $0
telecommunications business at other OEMs. Preferred Nil
Com Equity $311 Million
We believe very strongly that business
remains robust for Vitesse, and that the
company is on track to meet or exceed our
estimates for the current quarter. We also Earnings per Share
believe that the company will report a book FY 1997 $0.43
to bill of between 1.18 and 1.22. FY 1998E $0.65
FY 1999E $0.81
Although we can understand the industry FY 2000E $1.19
concerns, we believe that the strong
price/performance advantage that Vitesse P/E Ratio
enjoys is leading to increasing penetration FY 1997 54.8X
and increasing content with its current FY 1998E 36.3X
customers and new customers. This is FY 1999E 29.1X
leading to increasing revenues at even those FY 2000E 19.8X
customers that are indicating some level of
difficulty.
We believe that the current stock price is
particularly compelling as the shares are Company Description:
trading at the lowest multiple that we have Vitesse designs, develops,
seen in three years. We would be aggressive manufactures and markets digital
buyers of the stock at these levels. gallium arsenide integrated
circuits. It's products are
used in the high-performance
telecommunications,
datacommunications, test and
instrumentation markets.
Our quarterly EPS estimates are shown below.
1 Qtr. 2 Qtr. 3 Qtr. 4 Qtr. Year
FY 1997 Actual $0.09 $0.10 $0.12 $0.13 $0.43
FY 1998E Current $0.14A $0.16A $0.18A $0.20E $0.65E
FY 1999E Current --- --- --- --- $0.81E
FY 2000E Current --- --- --- --- $1.19E
Stock Prices (as of 9/17/98) of securities mentioned in this report:
Alcatel Alstrom (ALA-NYSE $19 1/4, not rated)
Ciena Corporation (CIEN-OTC $11 13/16, not rated)
Lucent Technologies (LU-NYSE $72 1/8, not rated)
Nortel (NT-NYSE $39 9/16, not rated)
Tellabs (TLAB-OTC $40 1/16, Buy) |
