Legg Mason Upgrades Semtech to Buy

Analyst Cody Acree says strong performance and a low stock price gives this chipmaker's stock appeal

Legg Mason upgraded Semtech (SMTC ) to buy from hold. The chipmaker posted 22 cents second-quarter earnings per share and expects 23 cents third-quarter earnings per share. Analyst Cody Acree says he upgraded on the firm's attractive internal execution, recent valuation contraction, and a broad participation in seasonally sensitive markets, which he believes is showing signs of positive momentum. He says with more than 60% of the company's revenue tied to computing and handset markets, along with his expectation of improving seasonal activity, he now thinks Semtech is an attractive opportunity for investors.

Acree says this view is augmented by Semtech's recent share weakness, leaving it with a forward p-e in the mid-teens. He upped the 87 cents fiscal 2005 (Jan.) earnings per share estimate to 88 cents, and raised the $1.08 fiscal 2006 earnings per share estimate to $1.11. He set a $23 target.

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