CEVA reported second-quarter revenues/Adj. EPS of $17.1 million/$0.21 versus the Street's $17.1 million/$0.18. Gross margin rose 400bps to 92 percent and total unit shipments grew 9 percent.
"We believe two primary factors are playing out in the space: 1) in a slowing/decking market, higher-end smartphones are looking for more and more levers to pull to lower cost of the device; 2) where we see growth (emerging market low/mid-end smartphones, these devices demand function and low price. Both trends greatly favor CEVA," analyst Andrew Uerkwitz wrote in a note.
CEVA grew LTE market share to 19 percent this year from 5 percent last year, and the analyst expects the trend to continue as each of its customers expand its LTE presence.
"Beyond mobile, CEVA's non-baseband segment continues to gain traction on both royalty and licensing. 2017/2018 are set up nicely as this segment becomes more material," Uerkwitz continued.
The company expects third-quarter revenues/non-GAAP EPS of $17.2 million–$18.2 million/$0.21–$0.23, while full-year 2016 royalty revenue guidance was raised to 35–45 percent year-over-year growth.
Based on continued LTE share gains, the analyst also increased his 2016 estimate for revenue/non-GAAP EPS to $69.2 million/$0.83 from $68.3 million/$0.78.
"We continue to like CEVA's story: LTE growth offsetting 2G shipment decline/pulling up ASPs paired with diversified/rapid growth outside of handset-baseband," Uerkwitz added.
The analyst also raised his price target to $37 from $32.
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