Friday, FBR Capital Markets initiated coverage of Atheros Communications Inc. (ATHR) stock with a Market Perform rating and a price target of $30.
Analyst Craig Berger said that although the stock is likely biased higher near term given very robust second half of 2009 business trends, he believes the intermediate-term risk/reward is about neutral. The analyst said that chip pricing pressure is intensifying in fourth quarter of 2009, Taiwanese WLAN vendors are likely winning more netbook share in 2010 led to a neutral intermediate-term risk/reward.
The analyst also believes the intermediate-term risk/reward is about neutral given: Atheros is early into its diversification efforts and largely remains a WLAN chip vendor; "combo" chips may drive some WLAN integration risks, thus slowing growth; and momentum metrics may be peaking, with first quarter chip shipments likely seasonally lower and growth rate comparisons likely to decelerate.
The analyst noted that growth opportunities exist in Bluetooth, Ethernet, GPS, and "combo" chips, as well as in netbooks and mobile devices, though these growth areas remain a show-me story in 2010. Evidence of share gains here could make us constructive on ATHR.
Currently, ATHR is up $0.50 or 1.94% and trading at $26.31.
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