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new pick list stock +4
The market's reaction to slightly weak guidance from Integrated Device Technology seems grossly overdone. To compare with InvenSense, whose guidance was for break even or slightly better EPS, when analysts were expect 8 cents on average, IDT management guided for EPS of 32-34 cents vs 36 cent consensus. Nonetheless, IDTI has dropped 30% yesterday and today; at prices below $18 the hybrid PE stands just below 10.
As with InvenSense, I see 10 as a minimum valuation and think 15 is more reasonable. IDT is being affected by the same mobile slowdown, and conventional computing to boot. However, the latter may simply be a pause as companies wait for the introduction of Intel's Broadwell architecture. Growth factors for the company include:
- leadership position in wireless charging
- cost synergies from the buyout of ZMDI
- entry into automotive markets
- a strong business in many aspects of wireless communications