Maxim (MXIM) is an OEM [original equipment manufacturer] of semiconductor analog and mixed signal ICs [integrated chips]. Management’s preannouncement for Q1 is a 2-8% decline in revenue. The restatement was completed, with a total after-tax impact of -$542.1 million on profit.

Management has announced a significant reduction in the capex for 2009, in response to the broad macro-weakness. We are reiterating our Buy rating on MXIM shares, given the diversity in the company’s markets, healthy product pipeline and strong cash generating capabilities.

We expect the stock to trade higher as the margin issues and macro impact plays out and the company’s true potential comes to light. Management has also announced that it would be using the growing cash balance to raise the dividend and buy back shares.

We believe there is room for significant appreciation in the share price. Consequently, we are maintaining our Buy rating on MXIM shares, and lowering our six-month target price to $20.00, which corresponds to a 16.7x P/E multiple.

Sejuti Banerjea contributed to this report.

Read the full analyst report on MXIM

“MXIM” Free Stock Analysis: Buy? Sell? Hold?
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