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Stifel ups Laird to 'buy', says selloff is overdone
Stifel upgraded technology company Laird to 'buy' from 'hold' on Thursday, saying the recent selloff is overdone.
It noted the share price is down 28% since October's third-quarter trading update, with investors worried about end volume demand and margin pressures from a key customer - which Stifel assumes is Apple - and foreign exchange exposure amid a weakening dollar. In addition, the share price has also been hit by a wider downturn in the markets.
The bank cut its 2018 estimates to reflect a £21m drop year-on-year in smartphone related revenues and for FX movements.
"Apple's revenue guide into 1Q ($60-62bn; consensus $65bn) all but vindicated speculation that Apple could cut the production of the iPhone X from 40m units to 20m units in 1Q. As such Laird is exposed to smartphone cyclicality and we now model for a £21m y/y drop in revenues from Apple in 2018e (£12-13m modeled prior)."
Its earnings per share estimates for FY18 are unchanged but it trimmed its EPS forecasts for 2018/19 by around 5%, and in turn its price target on the stock to 135p from 160p.
Still, it said Laird's valuation is now "overly conservative", hence the upgrade, adding that the stock price fall has more than accounted for margin/volume pressures faced in the company's smartphone business.
As far as the company's FY17 results are concerned, Stifel expects sales of £930m and flat earnings per share of 10.1p.
At 1535 GMT, the shares were down 0.9% to 117.40p.