NEW YORK (TheStreet) -- Applied Micro Circuits (AMCC) shares are down -6.6% to $9.01 on Wednesday after having its price target lowered to $12 from $16 by analysts at Canaccord Genuity (CCORF) who maintained their "buy" rating on the stock.
"While enterprise ARM version 8 competition will increase, we believe APM's material time-to market advantage should yield solid X-Gene sales growth near term, and even a niche share within the $12B+ server market eager for new competition should allow APM to achieve its target to double quarterly sales for the company exiting C2016. However, we now anticipate a more linear progression toward this revenue level," which lead to the price target decrease, analysts said.
TheStreet Ratings team rates APPLIED MICRO CIRCUITS CORP as a Hold with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:
"We rate APPLIED MICRO CIRCUITS CORP (AMCC) a HOLD. The primary factors that have impacted our rating are mixed some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow and a generally disappointing performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- APPLIED MICRO CIRCUITS CORP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, APPLIED MICRO CIRCUITS CORP continued to lose money by earning -$0.10 versus -$2.04 in the prior year. This year, the market expects an improvement in earnings ($0.18 versus -$0.10).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Semiconductors & Semiconductor Equipment industry. The net income increased by 231.3% when compared to the same quarter one year prior, rising from -$17.61 million to $23.12 million.
- The gross profit margin for APPLIED MICRO CIRCUITS CORP is rather high; currently it is at 66.66%. Regardless of AMCC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, AMCC's net profit margin of 44.65% significantly outperformed against the industry.
- AMCC has underperformed the S&P 500 Index, declining 5.38% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
- Net operating cash flow has significantly decreased to -$10.04 million or 374.35% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- You can view the full analysis from the report here: AMCC Ratings Report