On Mar 28, 2014, Zacks Investment Research upgraded Rambus Inc. (RMBS) to a Zacks Rank #1 (Strong Buy). The upgrade followed positive estimate revisions over the last 60 days.
Why the Upgrade?
Year-to-date, Rambus’ shares increased 11.8% while the 1-year return is a stupendous 90.5%. Some of the optimism can be associated with the recent licensing deals between the company and several semiconductor manufacturers.
Recently, Rambus signed a 5-year patent licensing agreement with Nanya Technology Corporation, a DRAM solutions provider. Rambus’ patented technologies are of great importance to chipmakers for manufacturing advanced chips used in computers and electronic goods. The company’s technology patents are being used by Fujitsu Semiconductor Ltd., NVIDIA Corp. (NVDA), Broadcom Corp. (BRCM), Micron Technology and MediaTek Inc. for their respective integrated circuit products.
In the beginning of 2014, Rambus signed a 10-year licensing agreement with Samsung Electronics. Per the agreement, Samsung will use Rambus’ integrated chip technologies and security technologies in its devices such as tablets, smartphones and set-top boxes though 2023.
Thus, these licensing agreements are a recurring revenue source for Rambus — the result of successful monetizing of its patents.
In the fourth quarter of fiscal 2013, the company reported customer licensing income (including patent royalties received and gain from settlements) of $73.8 million compared with $61.6 million in the year-ago quarter. Moreover, the company expects to introduce several innovative products and services in 2014 that would support its revenue growth, going forward.
Additionally, the company witnessed positive estimate revisions for the current quarter. Out of the two estimates, one was revised upwards over the past 60 days. This led to a significant increase in the Zacks Consensus Estimate, which now stands at 1 cent for the current quarter up from a loss of 7 cents over the same period of time.
Investors may also consider Juniper Networks (JNPR) which sports the same Zacks Rank as Rambus.