ACTS Initiated with a $5 Target

A Hold recommendation has been issued to semi-conductor company Actions Semiconductor Corporation (ACTS - Analyst Report) by Zacks senior semi-conductor analyst Ken Nagy, CFA.  Here's his latest update:

"ACTS Semiconductor Corporation designs and markets integrated platform solutions, including system-on-a-chips (SoCs). September quarter results missed consensus estimates on the top and bottom-line. The firm derives virtually all its revenue from the ultra-competitive MP3 market, which has experienced serious ASP erosion.

"Help may be on the way with the high-end Series 13, which has 30 design wins. We would remain on the sidelines until such time as the design wins are transformed into meaningful revenue growth. We are initiating our Hold recommendation and setting a six-month price target of $5.00.

"Each ADS represents six ordinary shares. The ADSs began trading in 2005 at US$8.00 per ADS on the Nasdaq National Market under the symbol "ACTS." The firm is currently trading at 8.4x 2008 earnings per ADS (EPADS). It is our opinion that Series 13 will drive long-term revenue and margin expansion. It may take several quarters for the design wins in the Series 13 to translate to revenue.

"In the meantime, investors will be forced to digest the ASP erosion that comes with the MP3 market. One major risk we see for the firm is the trend of an all-in-one device such as Apple’s (AAPL - Analyst Report) I-phone. This would force the firm to compete in markets which it simply does not have any clue about or are completely uncharted territory. We rate the share of ACTS as a hold and set a price target of $5.00, which translates to an 8.6x multiple of 2008 EPADS."

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