NEW YORK (TheStreet) -- Shares of NXP Semiconductors NV (NXPI - Get Report) are up 4.91% to $103.42 in mid-morning trading Friday, after analysts at Needham initiated coverage on shares of the company with a "strong buy" rating.

The firm set a price target of $140, citing the recent merger announcement with Freescale Semiconductors (FSL).

Needham said it believes the merger will transform the company into a powerhouse, making it the fourth largest semiconductor company in the industry.

The firm also noted that the combined company would be the number one supplier in auto semiconductors, number one supplier in global MCU, a dominant supplier in mobile payments, and a leading IoT supplier.

Needham analysts see "significant leverage in the model" and expect the combined company to generate "robust earnings."

The firm added, "Ultimately, we believe the stock has room for multiple expansion as investors realize this earnings power, which we estimate could exceed $9-plus over the next several years."

Netherlands-based NXP Semiconductors is a semiconductor company. Its product solutions are used in a range of automotive, identification, wireless infrastructure, lighting, industrial, mobile, consumer and computing applications.

Separately, TheStreet Ratings team rates NXP SEMICONDUCTORS NV as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:

"We rate NXP SEMICONDUCTORS NV (NXPI) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its robust revenue growth, notable return on equity, impressive record of earnings per share growth, compelling growth in net income and good cash flow from operations. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."

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

  • NXPI's revenue growth has slightly outpaced the industry average of 10.7%. Since the same quarter one year prior, revenues rose by 18.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • NXP SEMICONDUCTORS NV 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. During the past fiscal year, NXP SEMICONDUCTORS NV increased its bottom line by earning $2.17 versus $1.34 in the prior year. This year, the market expects an improvement in earnings ($5.81 versus $2.17).
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Semiconductors & Semiconductor Equipment industry average. The net income increased by 55.2% when compared to the same quarter one year prior, rising from $96.00 million to $149.00 million.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Semiconductors & Semiconductor Equipment industry and the overall market, NXP SEMICONDUCTORS NV's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly increased by 77.07% to $556.00 million when compared to the same quarter last year. In addition, NXP SEMICONDUCTORS NV has also vastly surpassed the industry average cash flow growth rate of -15.77%.
  • You can view the full analysis from the report here: NXPI Ratings Report