BEAR STEARNS KEEPS PEER PERFORM ON SPRINT NEXTEL
On May 7, Sprint Nextel (S) and Clearwire (CLWR) agree to combine their next-generation wireless broadband businesses to form a new wireless communications company. Bear Stearns analyst Phil Cusick says Sprint's equity in the joint venture is worth $7.4 billlion ($2.60 a share), and the $20 price implies a $3.9 billion value for Clearwire.
Backing out Sprint's 4G segment value and cash flow dilution, he estimates Sprint is trading at about 4.5 times his 2008 EBITDA estimate. He notes for Clearwire, new equity is both slightly accretive to current share price and lessens bankruptcy risk -- both are positives for Clearwire.
Cusick believes substantial funding for the WiMAX joint venture offers incremental upside for tower companies at high margins, which is not currently built into his estimates. But he says other strategic deals for Sprint unlikely in the near term and he does not believe a Nextel spin-off or sale is likely in 2008. He also does not expect significant acceleration in WiMAX rollouts until 2009.
FRIEDMAN BILLINGS RAISES TARGET FOR ON SEMICONDUCTOR
Friedman Billings analyst Craig Berger says ON Semiconductor (ONNN) posted first quarter results and gave second quarter guidance that were both much better than expected. He believes upside was driven by improving business trends and conservative mgmt guidance, consistent with many other chip firms in the first quarter.
Berger notes, on a stand-alone basis (excluding owning AMIS for the last few weeks of the quarter), first quarter revenues and pro forma EPS of $396 million and $0.20 beat his conservative estimates of $383 million and $0.15. He says, clearly, the earnings power at ONNN is much better than people thought, and management's execution capabilities continue to shine.
He raises $0.75 2008 EPS estimate to $0.90, $0.87 2009 EPS to $1.00, and 11 target price to 14. He reiterates outperform.
JEFFERIES UPGRADES VASCO DATA SECURITY INTERNATIONAL TO BUY FROM HOLD
Jefferies analyst Katherine Egbert says Vasco Data Security International (VDSI) has missed consensus revenue and/or EPS in each of the past three quarters due to slowing IT spending in Europe, which has manifested itself in procurement delays and deal slippage. Consequently, the stock price has decreased from a high of about 42 to about 10 in past six months.
Egbert now thinks the worst is behind VDSI, as evidenced by increase in component part inventory for products slated to ship over next few months. She says the company is also hiring in sales, making its claim for 30% revenue growth this year more credible.
She keeps EPS forecasts of $0.63 for 2008 and $0.76 for 2009, but anticipates getting more data from field checks over next several weeks. She has a 13 price target on the stock.