Jefferies Shills For 3 Well Known Semis and 1 New One

We’ve all seen the gigantic cocked run in the semis over the past two years. Everyone is in awe over the gains in AMD and NVDA. Jefferies is out with a note today, discussing their 4 top picks for the next year, 3 of which are common dinner table stocks, the other a new one that might be of interest to you.

AMD ($19 pt)

“AMD discussed positive market reaction to its server MPU [micro processing unit], EPYC, which follows the successful launch of its high end desktop MPU, Ryzen. Our own checks indicate interest in EPYC from five separate hyperscale [data center] players, and a tightness in supply of EPYC MPUs. Management also expressed confidence in its ability to achieve its target gross margin bogey of 40-44%.”

NVDA ($180 pt)

Nvidia “management believes that its data center business is still in the early innings and expressed confidence in its opportunities for growth in both the training and inferencing markets. The company believes it is moving closer to broader deployment of its Auto platform, Drive-PX2, and also believes its gross margins continue to drift up.”

XLNX ($78 pt)

“XLNX noted its software development environment (SDAccel) is now in private beta at AMZN. This expands the pool of programmers that can access FPGAs [field-programmable gate arrays] in the cloud, and is a step towards AMZN’s vision of accelerating applications on AWS [Amazon Web Services] using FPGAs without users having to do any extra programming.”

And the new one…

SGH ($23 pt)

“The mix of smartphones continues to trend towards premium models with higher memory configurations, driving content for SGH’s Brazil Memory business. We think this content and ASP [average selling price] growth translates to operating leverage on SGH’s manufacturing assets there.”

SGH is sharply higher today, as traderfags jump at the opportunity to climb aboard the next potential winner.

Here’s what I have on SGH. Any input is appreciated.

Stifel initiates SGH with a Buy and price target of $27. They view SGH’s segment as poised to benefit from the increased importance of memory in the datacenter architecture. As the rate of CPU improvement slows, they see data center customers looking elsewhere in the architecture to drive overall system gains. As memory evolves beyond a commodity, firm expects increased uses for SMART’s specialty memory products which can deliver solutions that larger memory cos are unwilling to dedicate the resources to address. They also believe SGH is poised to benefit from increased smartphone adoption in Brazil and local content laws that should amplify the organic growth rate.

Needham initiates SGH with a Strong Buy and price target of $20, highlighting co as a global memory company with three distinct business units: Specialty Memory, Brazilian Memory Products (DRAM and mobile memory), and Logistics Services. With a flexible business model focused on specialized markets, they believe SGH is on the cusp of revenue expansion via growing specialty memory products sold into servers, networking and telecom as well as a huge Brazilian market opportunity propelled by changing regulations in local content requirements for mobile memory, which is expected to increase from 40% in 2016 to 50% in 2017, and 60% in 2018. With a strong specialty memory division and revenue expansion in Brazil via expanding content regulations, firm believes SGH is worth $20 on a P/E of 7.3x and a EV/S of 0.6x on calendar year 2018 ests.

Via Briefing.com

Headquartered in California, SGH is a specialty memory manufacturer, providing chips for desktops, notebooks, servers, and smartphones. In addition to selling memory units to the Brazilian market, the company sells specialty memory to original equipment manufacturers from around the world. The company works with OEMs to develop memory that matches customer-specific requirements. SGH has relationships with industry heavyweights like Cisco Systems, Samsung, Hewlett Packard Enterprise, Dell, and LG, among others.

The company has been in business since 1992 and operations in Brazil began in 2002. More than 480 workers are employed in Brazil, where the company processes imported wafers and cuts, packages, and tests them to create memory components used to manufacture modules, flash-based products, and other memory. There is no other company in Brazil that packages and tests mobile memory for smartphones.

The Brazilian business focuses mostly on Dynamic Random Access Memory (DRAM) components and modules for desktops, notebooks, and servers. The company believes that Brazilian content and tax regulations provide financial incentives to customers to procure locally manufactured memory products. The company has leveraged its experience and success in DRAM to expand into the mobile memory arena.

Its specialty memory solutions business has a portfolio of more than 2,000 products, including all generations of DRAM, embedded and removable Flash, enterprise memory, hybrid memory, and non-volatile memory solutions. The company also helps customers manage supply chain planning and execution, reducing costs and increasing productivity.