J.P. Morgan Removes OmniVision from Focus List

Analyst Paul Coster says earnings guidance is disappointing

J.P. Morgan removed OmniVision Technologies (OVTI ) from its focus list, and keeps the overweight rating.

Analyst Paul Coster says the first-quarter results of 32 cents earnings per share were in line with his estimate, but forward guidance is disappointing. OmniVision, which designs image sensors used in digital cameras, sees $80 million to $90 million in second-quarter revenue and 20 cents to 25 cents earnings per share, which is below his estimates for $102.7 million in revenue and 33 cents earnings per share. Coster says guidance appears driven by a draw down of inventory of existing product, and a ramp in production of the new OmniPixel line.

He believes revenue growth should accelerate in the third quarter as new product stabilizes, wafer starts, and yields improve. He cut the $1.39 fiscal 2005 (Apr.) earnings per share estimate to $1.21, and cut the $1.66 fiscal 2006 estimate to $1.44. Also, Coster removed the company from its focus list given the near-term challenges with product transition.

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