Chip Stocks: Needham Launches SWKS, RFMD, TQNT With Buys

Needham analyst N. Quinn Bolton today launched coverage of the handset-focused chip sector, starting Skyworks (SKWS), RF Micro Devices (RFMD) and TriQuint (TQNT) with Buy ratings, starting Anadigics (ANAD) with a Hold. Here’s a rundown on his calls:

• Skyworks: “We view Skyworks as the best positioned company in the wireless front-end component sector as highlighted by the fact the company supplies components to all leading handset and smartphone OEMs and has reference designs with all of the leading baseband suppliers,” he writes. “Not only is Skyworks the best positioned company in the wireless front-end, but also the company boasts the best margins of its peer group and we expect margins will continue to trend upward over time. If investors own only one RF component supplier, we recommend Skyworks as that core holding.” His target price on SWKS is $24.
• RF Micro: “We believe investor concerns regarding potential share loss at Nokia and the company�s balance sheet are overblown, while the company�s customer diversification efforts and strong free cash flow are under-appreciated.” Price target: $6.50.
• TriQuint: “As the RF front-end industry�s most vertically integrated supplier, with internal production capabilities for power amplifiers, switches, filters and duplexers, we believe TriQuint is uniquely positioned to gain share as mobile device OEMs increasingly look for integrated module solutions,” he writes. “Outside of handsets, we forecast strong growth in the company�s high margin networks business. With robust growth in its core markets, we expect TriQuint will steadily improve its margins over time.” Target: $9.
• Anadigics: “We believe Anadigics has among the industry�s best, if not the best, linear power amplifiers, with a strong position in both the CDMA and WCDMA/HSPA power amplifier markets
  and close relationships with several leading baseband suppliers,” he writes. “However, as a niche player that lacks internal filter, duplexer, switch and module product offerings, we believe ANAD may be disadvantaged given the transition to module-based solutions in the mobile device industry.”

In today’s trading:

• SWKS is down 38 cents, or 2.3%, to $16.41.
• RFMD is up 8 cents, or 2.1%, to $3.99.
• TQNT is down a penny at $6.10.
• ANAD is down 14 cents, or 3.2%, to $4.22.