Integrated Device Technology (IDTI, Financial) cheered the Street with its third quarter numbers that came above the analysts’ consensus. The company enjoys a strong stand in each of its segments namely computing, communications, and consumer. Led by its strong performance the stock yanked up considerably and is currently at its 52-week high. But there is more to this story than what just meets the eye. Investors are skeptic about this rally and questions about the consistency of this growth. Starting with its numbers for the last quarter, let’s dig deep and see where the stock is heading.
The quarterly performance
Its revenue for the quarter rose 10% from last year to $151.2 million, while earnings adjusted for onetime expenses came at 25 cents a share compared to 20 cents per share last year. The numbers were greatly influenced by its new product launches, favorable ASP trends, and higher content. Along with this, it has a strong command in the wireless space and expects its 4G infrastructure demand to remain steady and robust in 2015.
This demand will in turn translate into continued strength of its Serial RapidIO business, which is designed into all 4G base station suppliers. And now it wants to extend its success in 4G base stations into new emerging applications such as metropolitan area networks and cloud radio access networks (C-RAN).
Both these new technologies have immense growth potential in the days ahead and it will begin its shipping in the later part of this year. The company sees a similar traction in its RF products with significant growth in customer base. In fact, its shipments more than doubled during the quarter compared to a year ago period. And the management expects this momentum to continue in the future as well.
Growth drivers
Talking about its high performance computing or datacenter market, it was the strongest growth segment during the quarter. There is a growing demand for advance memory technology, and the company hopes to capitalize on this need in the days ahead. It is already gaining market share with its new launches such as DDR4 and LR-DIMM even while having a strong position in its earlier DDR3 solutions.
In addition, Integrated Device Technology is a market leader in wireless charging. In October 2014 the company bagged an order from Kube Systems, which chose IDT wireless power transmitter for its cutting-edge wireless charging stations available in select Marriott Hotels. As a result, customers at Marriot have first-adopter access to the convenience of wireless charging . Orders such as these are pouring in for Integrated Device. Therefore, its wireless charging technology would be a significant growth driver in the coming years.
Guidance and conclusion
For the fourth quarter the chip maker expects its revenue to be in the range of $154 million to $162 million, representing more than 33% growth on a year over year basis. In fact, the company anticipates all its segments namely communications, Computing and consumer to outperform the market. The same is reflected from its favorable forward P/E of 19.26 compared to a trailing P/E of 58.95. Moreover, the stock had an outstanding performance in the past few months and considering its future growth opportunities we could see more upside from here on. In the light of these factors investors can consider adding Integrated Device Technology to their portfolio.
