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Zacks Small-Cap Research Raises Silicom Price Target to $35.00

Zacks Equity Research

Zacks Small-Cap Research Raises Silicom Price Target to $35.00

By Ken Nagy, CFA

Silicom (NasdaqGM:SILC) engages in the design, manufacture, marketing, and support of connectivity solutions for a range of servers and server based systems. The firm has several growth engines including Information Technology’s return to growth, the march to 10GB per second technology, a large and growing base of OEM customers includes most of the market-leading players, staged launch of new products, and a strong OEM business model which limits operating expenses. SETAC, the firms newly patented Server to Appliance Converter, which combines the best of standard servers with hardware appliances should allow the firm to push its revenues beyond the 50 million run rate level in coming years.

Dividend Policy and Financial Flexibility 

In mid-January 2013, the Company’s Board of Directors adopted a policy for distributing dividends, subject to all applicable laws, where each year Silicom will distribute a dividend of up to 50% of its annual distributable profits.

This quarter was Silicom’s highest ever cash level which demonstrates to both its existing customers as well as new potential customers that the Company can meet all their needs and provide them with support over the long term.

Furthermore, the improvement of assets provides the Company with a substantial level of working capital and financial flexibility, placing Silicom in a position of strength and stability, enabling the Company to continue to invest in its business as well as take advantage of opportunities as they arise.  

New Growth Platform

On February 19, 2013 the firm announced that it has launched a new family of Intelligent Nano-Second Time-Stamping (:NICS), a breakthrough enabler of next-generation network monitoring in Big Data environments, and that it has already secured an immediate Design Win for the product line’s first adapter. The firm will be recording its first Time Stamp revenues shortly, and projects a rapid sales ramp-up to reach annual revenues of $15 to $20 million within a few years.

In today’s faster and more inter-connected networks, time-stamps at the packet level are prerequisites for effective analysis of network performance-related issues such as latency and jitter, as well as critical enablers of e-trading, digital forensics and other time-sensitive applications.

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