December 28, 2007

O2 Micro

From Zacks:

\'O2Micro has a strong position in the notebook computing market and a growing position in the LCD monitor and LCD TV markets. Management has focused investments into these new vertical markets, attempting to broaden its product portfolio.

\'September quarter top and bottom-line surpassed the consensus estimate. Forward guidance is for a 1-7% revenue increase. The LCD TV markets represent an opportunity to grow its revenue base and boost margins to the low sixties. Consequently, we are upgrading the shares of OIIM to a Buy rating.

\'The shares are currently trading at a 13.4x multiple of its 2008 earnings estimate (P/E). The long-term potential of many of the new products being developed and deployed should drive future growth. Earlier design wins are expected to begin contributing revenue in 2007 and have done so. The company is expected to launch new products in the LCD/LCD TV, battery management and VPN/firewall areas through the remainder of the year.

\'The persistent weakness in the notebook segment may signify a fundamental shift in the product mix of the company. However, new products have begun to reverse the slide in notebook sales. Consequently, we believe the stock will trade at higher valuation metric levels. We are setting our price target to $18.00.\'


From Barron's:

The company designs proprietary analog semiconductors used in LCD TV's, LCD
computer monitors, notebook computers, and other electronic devices. Its LCD invert-
er chips provide backlighting in liquid crystal displays, and their solid position in this market is backed
by more than 300 patents and a 600-person engineering team in China. O2 Micro has vigorously
defended its patent portfolio in court, recently winning major judgments against Sony and Samsung.
Driven by higher sales volumes with customers who lost to O2 Micro in court and the hot LCD market
overall, O2 grew revenue by 30% over the last 12 months. In 2008, we expect the company will grow rev-
enue between 25%-30% and earn $1 per share as profit margins expand due to lower litigation expense.
With projected earnings growth of nearly 50% next year and a current P/E of 13 times, we believe O2
Micro represents a great growth opportunity at a very reasonable price.

No comments: