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OmniVision Technologies, Inc. Message Board

  • cyclad cyclad May 4, 2004 12:12 PM Flag

    For the Pumpers and Longs in Denial

    JPM Reiterates Overweight on OVTI
    by: jrozengauz
    Long-Term Sentiment: Strong Buy 05/04/04 09:18 am
    Msg: 25331 of 25380

    OmniVision Technologies Overweight
    Ticker OVTI EPS 2003A 2004E 2005E
    Price(05/03/04) $22.73 1Q (Jul) $0.03 $0.12A $0.31
    52-Wk.Range $13.17-33.83 2Q (Oct) $0.06 $0.19A $0.36
    Mkt.Cap(BN) $1.38 3Q (Jan) $0.09 $0.28A $0.41
    Fiscal Year Apr 4Q (Apr) $0.12 $0.33 $0.39
    Shares O/S(MM) 60.85 FY $0.31 $0.93 $1.47
    CY $0.71 $1.40 $1.64
    P/E CY 32.0 16.2 13.9
    Sales FY $109.00 $309.10 $449.00
    *Historical EPS adjusted to reflect 2:1 stock split effective 2/18/2004.

    * Omnivision presented at the JPMorgan Technology and Telcom Conference in San
    Francisco yesterday. We believe the company is on track for the April quarter.
    We noted two positives:
    * First, the CFO described the pricing environment as "not hostile". We are
    unable to discern a major change in the competitive landscape in the last
    three months; a perspective that may be validated by the CFO's comment.
    * Second, the CFO is beginning to see a refresh cycle for camera cellphones,
    as the market begins to shift from VGA to 1.3MP. The latter is now shipping in
    volume, and should help sustain ASPs and gross margins. We believe Omnivision
    has a relative competitive advantage at higher resolutions, being typically
    about 6-months ahead of its peers in terms of product cycle.
    * In addition, the company appears to be seeing good demand from VARS in the
    area of security and surveillance, and claims to be working with ten tier-1
    OEMs in the automotive space, pointing to long-term growth drivers.
    * Reiterate Overweight Rating. Trading at 16.2 times CY04 EPS and 13.9 times
    CY05, the stock looks significantly undervalued relative to our EPS growth
    forecast and the stock's recent trading level.

    Valuation and Rating Analysis
    We reiterate our Overweight rating for OVTI. Consistent with other stocks
    under our coverage, we are basing our valuation on CY2004 earnings projections
    at present. OVTI is currently trading at 16.2 times our revised CY2004 EPS
    estimate of $1.40, a 77% discount to our estimated 2003E-2007E net income CAGR
    of 65% (includes hyper-growth phase) and a 54% discount to its three- year
    historical average forward P/E multiple of 35 times (though multiples appear
    to be declining). OVTI is trading at just 13.9 times our CY05 forecast,
    however we do not believe this becomes a valuation consideration until we are
    into mid 2004 and have better visibility into end market demand trends. We
    acknowledge that OVTI's rate of revenue growth is beginning to decline, but we
    believe this is already priced into the valuation.

    Risks to Our Rating
    Our view of OVTI could become more negative if competition intensified
    significantly in the context of slowing growth, inventory increases result in
    higher obsolescence risk, or some of the pending lawsuits went against the
    company. In addition, we would view operational disruption resulting from the
    relocation of testing to China as a negative. Finally, the company is exposed
    to supply chain risks that may prevent the company from meeting production

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