Tuesday, April 20, 2010

Atheros Communications (ATHR) Trounces Q1 2010 Estimates

Finally some company specific news to delve into as we enjoyed yet another Magical Monday, the 29th of the past 33... rain, shine or snow (or fraud), the US market will rally on almost any given Monday.

Last night, Atheros Communications (ATHR) continued its recent trend of delivering even against heightened expectations.  (full report here)  As always, Wall Street creates its own game of lowballing estimates and then beating them so that everyone wins (execs look good, stock surges on "surprises", investment banks get future business in return) but even taking that into account the results look quite nice.  I continue to love the space, and the company's position in it... at some point valuation begins to matter but since we're now valuating retail stocks growing at 12% over the long run with 40x+ forward multiples, I guess we can slap companies with 25%+ growth with 80x multiples.  It's 1999 logic.

That said estimates for ATHR for full year 2010 have increased from $1.70 to $2.13 in just the past 90 days; for this sort of growth the stock seems quite a bargain.  The stock was up about 6% in after hours yesterday.

  • Atheros Communications Inc. on Monday reported a profit for the first quarter as its revenue more than doubled from a year earlier, when it posted a loss.  The maker of chips for wireless networking products earned $19.7 million, or 27 cents per share, in the quarter. A year earlier, it lost $7.6 million, or 12 cents per share.
  • Excluding one-time items, Atheros earned $40.7 million, or 57 cents per share, compared with a profit of $3.9 million, or 6 cents per share, a year earlier.
  • Atheros' revenue rose to $214.7 million, from $87.9 million.
  • Results exceeded the forecasts of analysts polled by Thomson Reuters, who were expecting earnings of 51 cents per share excluding one-time items and revenue of $201.2 million.
  • The company's recently acquired power line communications business added slightly more than $20 million in revenue in the first quarter and will continue to be a growth driver, Atheros said on a conference call with analysts.
  • Canaccord Adams analyst Bob Burleson sees revenue growth and market share gains continuing into the latter part of the year.  "Firstly, the second half is seasonally stronger part for the PCs, second you'll see more of the design wins they have ramp in the second half of the year," he said.
  • Intel's new notebook platform and Apple's release of new versions of iMac, for which Atheros is supplying wi-fi chips, will also benefit the company, Burleson added.
  • Gross margins for the quarter were 49.5 percent, compared with 48.1 percent a year ago.   
[Jan 25, 2010: Atheros Communications Crushes Estimates]
[Oct 20, 2009: Atheros Communications Trounces Estimates, Raises Guidance]
[Sep 10, 2009: Bookkeeping - Starting Atheros Communications]

Long Atheros Communications in fund; no personal position


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