Zacks.com: Analyst Blog

Anadigics, Inc. (ANAD) reported Q2:FY08 results, which topped our estimates, driven by stronger than anticipated growth in broadband. Revenues of $80.5 million, up 8% q/q and 49% y/y, exceeded our estimate of $78 million.

The management issued guidance for the September quarter of $0.10-0.14 on revenues of $75.0-81.0 million, which compares to street expectations of $0.18 on revenues of $83.1 million and our estimate of $0.17 on revenues of $82.2 million. The company indicated that the guidance shortfall was a result of overall weak wireless demand and an inventory re-balancing at some of its customers.

Operating expenses are expected to increase by $1 million sequentially in the September quarter, which includes an additional $500k of depreciation related to the new China facility. Broadband is expected to continue its strength into the September quarter and help partially offset the weakness in the wireless business. The management indicated that the wireless business is expected to be down around 10% from the June quarter.

ANAD is increasing its investment in their 6' gallium arsenide facility in China to $100 million, up from the previously planned $49.9 million. This is expected to help complete construction of the fab by October 2008 and result in full production capabilities by the second half of 2009. The increased investment keeps the timetable of the China facility the same; it just takes the line from a pilot line to a fully operational line by the second half of 2009.

The stock is currently trading at 10.2x our current FY2008 EPS estimate of $0.58. Given the current weakness in its wireless segment, coupled with an uncertain macro environment, we have adjusted our FY2008 estimates and maintain our Hold rating with a revised target price of $8.00. Our current six-month target price is 13.8x our FY2008 EPS estimate and 11.4x our preliminary FY2009 EPS estimate.

Read the full analyst report on ANAD