Will This Upgrade Help RF Micro Devices (RFMD) Stock Today?

Story updated at 10 a.m. to reflect market activity.

NEW YORK (TheStreet) -- RF Micro Devices (RFMD) was upgraded to "buy" from "neutral" by DA Davidson Thursday.

RF Micro gained 0.7% to $8.50 in morning trading.

The firm set a price target of $11 for the chipmaker. According to DA Davidson analysts RF Micro can grow margins faster than expected.

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Separately, TheStreet Ratings team rates RF MICRO DEVICES INC as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:

"We rate RF MICRO DEVICES INC (RFMD) 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 revenue growth, largely solid financial position with reasonable debt levels by most measures and solid stock price performance. However, as a counter to these strengths, we find that the company's return on equity has been disappointing."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • RFMD's revenue growth has slightly outpaced the industry average of 3.4%. Since the same quarter one year prior, revenues slightly increased by 6.4%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • RFMD's debt-to-equity ratio is very low at 0.13 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.49, which illustrates the ability to avoid short-term cash problems.
  • 43.63% is the gross profit margin for RF MICRO DEVICES INC which we consider to be strong. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, RFMD's net profit margin of 2.16% significantly trails the industry average.
  • RF MICRO DEVICES INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, RF MICRO DEVICES INC reported poor results of -$0.20 versus $0.00 in the prior year. This year, the market expects an improvement in earnings ($0.42 versus -$0.20).
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Semiconductors & Semiconductor Equipment industry and the overall market, RF MICRO DEVICES INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • You can view the full analysis from the report here: RFMD Ratings Report

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Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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