TD Securities raises target on ATI
...1-year target raised to $24.40 Cdn..And re-confirms its BUY rating...says ATI is undervalued compared to NVDA and INTC...
From today's Action Notes:
ATI increased its Q1/F04 (November) guidance after the market close on November 17:
revenue of $440 million to $470 million (previously $400 million to $430 million), ahead of our
prior estimate of $423 million (consensus of $425 million); and Q1 adjusted EPS guidance of
$0.16 to $0.20, ahead of our $0.11 estimate and consensus of $0.13. The revenue and gross
margin upside (towards the high-end of the 32% to 35% range, versus the previous mid-point
of the range) is primarily driven by better than expected discrete desktop graphics chip
shipments. ATI continues to expect a typical seasonal pattern in Q2 (February), which we
interpret to imply a 5% to 10% sequential revenue decline. We forecast F2004 revenue of
$1.78 billion (up 9% from $1.63 billion previously, and versus consensus of $1.66 billion),
driven entirely by higher discrete desktop chip revenue, and adjusted EPS of $0.61 (previously
$0.52, and versus consensus of $0.50). ATI trades at only 22x our new C2004 EPS estimate of
$0.62 (previously $0.57), at an unjustified discount to NVIDIA at 28x our C2004 EPS estimate
of $0.72, and at a discount to Intel at 28x consensus C2004 EPS estimates of $1.15. We
maintain our BUY recommendation on ATI, and are increasing our target price to
$18.60/C$24.40 (previously $17.10/C$22.40), based on our upwardly revised C2004 EPS
estimate (our target P/E multiple is unchanged at 30x).