EZchip Semiconductor Ltd. (EZCH) soared to a record high in New York yesterday on speculation the Israeli chipmaker will be bought after competitors were acquired over the past two months.
The Yokneam, Israel-based company, whose biggest customers include Juniper Networks Inc. and Cisco Systems Inc., advanced 2.5 percent to $40.26, sending valuations to 30.6 times estimated earnings, nearly twice the average level for companies on the Nasdaq Composite Index. The Bloomberg Israel-US 25 Index (ISRA25BN) of the largest Israeli companies listed in New York climbed 0.5 percent to 86.50, led by SodaStream International Ltd. (SODA)
EZchip (EZCH) may become a buyout target even after forecasting that first-quarter revenue will remain steady from the fourth quarter, according to Chardan Capital Markets LLC. Marvell Technology Group Ltd. (MRVL), maker of the BlackBerry smartphone processor, bought Xelerated AB last month, and Broadcom Corp. (BRCM), which makes chips that help mobile devices connect to the Internet, acquired NetLogic Microsystems Inc. on Feb. 17.
“The reason the stock has had such a run up is that people are expecting that the company is going to be acquired,” Jay Srivatsa at Chardan, which has a “neutral” rating on EZchip’s U.S.-listed shares, said by phone in New York yesterday. “EZchip guided a very weak first quarter and it’s still very expensive. Still, it seems like investors don’t want to miss out on an opportunity.”
EZchip Chief Executive Officer Eli Fruchter declined to comment on a possible buyout when contacted by e-mail yesterday.
EZchip, whose products allow for quicker data delivery, added 3.3 percent to 146 shekels in Tel Aviv yesterday, or the equivalent of $38.97.
The chipmaker has surged 40 percent in New York over the past year, outperforming the Nasdaq benchmark, which climbed 8.6 percent, after demand for its processors rose as an increasing number of consumers use smartphones and handsets to surf the Web, play games and download music and videos.
“This network processor company is poised to grow revenue and earnings rapidly as its next-generation product ramps up,” Andrew Uerkwitz, an analyst at Oppenheimer & Co. in New York said by phone. “There has always been acquisition pressure that has lifted EZchip due to the growth potential.”
Uerkwitz rated the shares “perform” saying the company is “fully valued” after the rally.
EZchip reported a fourth-quarter net loss of $5.95 million on Feb. 8, compared with net income of $4.03 million in the same period last year. The company incurred a one-time charge for repaying $9.9 million to the Israeli Office of the Chief Scientist, a government unit that support local companies’ research and development.
“With regards to guidance for the coming quarter, we expect revenues to be flat to slightly down,” CEO Fruchter told analysts on a call after reporting earnings.
Israel, whose population of 7.8 million is similar in size to Switzerland’s, has about 60 companies traded on the Nasdaq, the most of any country outside the U.S. after China. The nation is also home to more startup companies per capita than the U.S.
Gazit-Globe Ltd. (GZT), the Israeli real estate company that listed shares on the New York Stock Exchange on Dec. 13, declined 3.9 percent to $9.99 after its shares in Tel Aviv retreated 2.6 percent to 37.81 shekels, or the equivalent of $10.09. Equity One Inc. (EQY), the U.S. unit of Gazit-Globe, reported a net loss of 4 cents per diluted share during the fourth quarter, after posting a profit of 9 cents for the same period last year.
SodaStream, an Airport City, Israel-based homemade soda machine maker, climbed 7.1 percent to $41.79, the most in more than a month.
Tower Semiconductor Ltd. (TSEM), a chipmaker, dropped 3.8 percent to 77 cents, declining 12 percent in the week. Shares in Tel Aviv retreated 4.2 percent to 2.91 shekels, or the equivalent of 78 cents.
The Migdal Haemek, Israel-based company raised $64 million from Israeli institutional investors in a convertible bond offering, according to a Feb. 20 statement.
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