Rambus: 4 Ways To Win; JPMorgan Adds To Focus List

Following the 8.5 percent pullback in Rambus Inc. RMBS shares, after the company reported its fourth-quarter results, JPMorgan’s Paul Coster believes the selloff presents an attractive buying opportunity, “with some protection to the downside from the firm’s incumbent licensing business and plenty of upside potential associated with the firm’s investment in disruptive data center/cloud service and mobile-edge technologies.”

The analyst maintains an Overweight rating on the company, with a price target of $14.50.

Focus List

Adding Rambus to the U.S. Analyst Focus List as a near-term long idea, Coster mentioned that the five-year licensing contract the company signed with Western Digital Corp WDC on March 6 is an “initial and potentially important validation” of Rambus’ strategy.

The recent acquisition made by the company builds momentum in the chips and cores segments, diversifying Rambus’ business, raising the pace of go-to-market for innovations, adding new customers and adding “a layer of growth” to a stable base of contracted licensing businesses that the analyst believes extends through 2020.

“The acquisition of Inphi and Snowbush IP plus eCebs and BellID seem focused on significant growth markets and align with the firm’s 12-15 percent revenue CAGR goal, presenting significant upside to our 2018 forecast, if achieved,” Coster stated.

Rambus believes its recent acquisitions would accelerate its path to market in a $600 million served addressable market in the data center space, as well as an $800 million in mobile payments and smart transport.

4 Initiatives

In addition, the analyst noted, “Rambus has launched four major R&D initiatives that could disrupt the data center industry: smart data acceleration, storage class memory, next-gen buffer chips, and cryogenic computing.”

Coster believes success in one or more of these initiatives could help make the company an attractive acquisition target for a strategic buyer in a consolidating semiconductor industry.

At last check, shares of Rambus were up 2.81 percent at $13.16.

Related Link: Rambus Announces License Agreement With Western Digital Products Through 2021

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