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Robbie Stephens: More Vigor for Vitesse


Robertson Stephens upgraded Vitesse Semiconductor (VTSS) to strong buy from buy.

Analyst Arun Veerappan says the chipmaker reiterated its guidance for 10%-15% quarter over quarter revenue growth for Q2 and he is encouraged by the company's re-affirmation. Shares are trading at 35.6 times its $1.83 calendar 2002 EPS, below peer group. Veerappan says as the company executes through the first half of the year, and as investors begin to appreciate opportunities that lie ahead in the switch fabric and forward-error correction markets, he believes the multiples associated with the stock can expand to match the company's growth rate for the coming two years, which, in his view, is the 50%+ range. Therefore, he uses a 50-times multiple on calendar 2000 EPS, arriving at a $91 target.


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