Morgan Stanley upgraded its investment recommendation on shares of Silicon Labs (SLAB) to strong buy from outperform.
Analyst Mark Edelstone says that given current valuation parameters and numerous near-term catalysts, he thinks the company is one of the most attractive small-cap stocks in his universe. He notes that the PC modem inventory correction appears to be coming to an end, and that new product revenue should begin to reaccelerate. Edelstone says silicon Direct Access Arrangements (DAAs) account for 66% of sales, and should recover in the second half of 2001, even if PC market demand remains sluggish. The analyst says wireless and embedded modem revenue should also drive strong growth. He sees breakeven resultys in 2001 and EPS of $0.40 in 2002. Edelstone has a $30 price target on the shares.