NEW YORK (TheStreet) -- Shares of Atmel (ATML) were gaining 4.6% to $9.36 on heavy trading volume Thursday following analyst firm FBR's note about the semiconductor industry.

In a note to investors, FBR analyst Christopher Rolland said that about 32% of publicly traded U.S. semiconductor companies will be acquired this year if the current rate of consolidation in the market continues, according to Benzinga.

Atmel is his top acquisition candidate in the current semiconductor market, according to Rolland. The analyst said the company has an "excellent" MCU product portfolio with two architectures and is less R&D inventive than other companies.

Rolland noted that Atmel has one of the oldest and most efficient fabs globally which can offer a potential acquirer "excellent gross margin accretion.

About 7.8 million shares of Atmel were traded by 12:29 p.m. Thursday, above the company's average trading volume of about 5.1 million shares a day.

TheStreet Ratings team rates ATMEL CORP as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:

"We rate ATMEL CORP (ATML) 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 expanding profit margins. However, as a counter to these strengths, we find that we feel that the company's cash flow from its operations has been weak overall."

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

  • ATMEL 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, ATMEL CORP turned its bottom line around by earning $0.08 versus -$0.05 in the prior year. This year, the market expects an improvement in earnings ($0.46 versus $0.08).
  • 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 661.5% when compared to the same quarter one year prior, rising from $2.17 million to $16.50 million.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry, implying reduced upside potential.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. In comparison to the other companies in the Semiconductors & Semiconductor Equipment industry and the overall market, ATMEL CORP's return on equity is significantly below that of the industry average and is below that of the S&P 500.
  • Net operating cash flow has decreased to $40.14 million or 13.19% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
  • You can view the full analysis from the report here: ATML Ratings Report