Cowen Names 4 Top Semi Picks: AMD, Ambarella, Broadcom, Monolithic Power

Cowen analyst Matthew Ramsay initiated bullish coverage on several companies in the semiconductor space on Thursday afternoon.

“We believe application-specific programming computing and artificial intelligence will combine to infuse growth in 4 key markets… keeping semiconductor growth strong,” Ramsay said in a note.

The four companies at the top of Ramsay’s list all received Outperform ratings:

• Advanced Micro Devices, Inc. AMD ($18 price target);
• Ambarella Inc AMBA ($65 price target);
• Monolithic Power Systems, Inc. MPWR ($150 price target); and
• Broadcom Inc AVGO (transferred from Karl Ackerman; price target cut from $315 to $300).

After 10 Long Years: AMD Vs. Intel

AMD is expected to see an inflection point in the competitiveness of its products versus Intel Corporation INTC. AMD’s new 7nm processors, expected later this year, are roughly equivalent in performance to Intel’s 10nm node and will allow the former to go head-to-head with latter for the first time in over a decade.

The analyst anticipates that blockchain-related sales, which accounted for 10 percent of AMD’s revenue in the first half of 2018, will decline sharply later this year, but will be offset by strong gaming and datacenter GPU sales.

Believe What Ambarella’s Computer Vision Sees

Ramsay concedes that the near-term outlook for Ambarella is challenging, with the company transitioning away from GoPro Inc GPRO and drone cameras. Similar to AMD though, investors might be underestimating the company’s long-term strategy.

The release of new hardware, a detailed computer vision plan, and the successful demonstration of a fully autonomous car utilizing all-Ambarella technology are all cause to be confident in the value of the company’s IP, according to the analyst.

MPS Adds A Pillar To The Semi Growth Story

“We believe [Monolithic Power Systems] represents one of the most attractive organic growth stories in the semiconductor industry,” said Ramsay, adding that upcoming product ramps will allow the company to maintain its 21 percent growth rate.

Monolithic has been able to win a large share of business in multiple end markets thanks in part to its fabless and programmable approach and focus on system level integration, which allows it to focus on solving customer problems.

Broadcom: Steady Long-Term Growth

Looking back, Ramsay sees the company’s attempted hostile takeover of QUALCOMM, Inc. QCOM as an opportunistic attempt to acquire a top name. He also doubts a bid for Toshiba’s chip business was ever seriously on the table.

The takeaway is that Broadcom is closing the book on its pursuit of large acquisitions, and any future deals will likely be accretive and smaller than $10 billion.

“Going forward, we expect a commitment to capital return via dividend increases and buybacks,” said Ramsay.

Other Initiations

Ramsay initiated coverage of the following stocks with Outperform ratings:

• CEVA, Inc. CEVA: $43 price target; 
• DSP Group, Inc. DSPG: $15 price target;
• NVIDIA Corporation NVDA: $325 price target; and
• Silicon Laboratories SLAB: $125 price target.

Three other companies received Market Perform ratings:

• Cirrus Logic, Inc. CRUS: $40 price target;
• Intel Corporation INTC: $55 price target; and
• QUALCOMM, Inc. QCOM: $58 price target.

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