Altera (ALTR, Financial) had a shaky finish to fiscal 2014, delivering mixed results in the fourth quarter. The company’s results didn't meet its guidance, falling short of consensus estimates. In addition, Altera has also released light guidance for 2015. However, the company did post strong growth in earnings.
Altera is now quite cautious about its outlook for 2015. It is expecting the revenue to be flat by 4% in the first quarter of new fiscal year. However, this seems to be a short term crunch for it as it is seeing some positive momentum on the back of its past performance. Also, a solid growth along wireless, telecom, military and industrial segment will further add meaningfully to Altera’s growth leading it see sequential growth returning in later half of 2015.
Key contributors to growth
Though the chipmaker’s performance was not up to the mark in the recently reported quarter yet there are some key contributors to its growth in future. The wireless segment is now fairly stable and it is showing positive growth in the upcoming quarters. Out of its 11 submarkets, Altera is seeing a double digit growth in 7 of them. This growth will surely add wings to its growth, making it faster growing company in the PLD market. It also expects the computer market to grow well in the second quarter along with growth along communication and non-communication markets as well. Altera is focusing well on the R&D initiatives to offer a strong pipeline of products that can help Altera to strengthen its position in the market.
Another great move by Altera is that has recently demonstrated its attractive portfolio of FPGA and power solutions. This can be a key growth driver for it future as with this now the system designers can use field programmable gate arrays and SoCs with Altera Enpirion power solutions to achieve new levels of power performance. This is an exciting introduction by Altera and it will surely help Altera to improve its performance in the upcoming fiscal year.
Competitors and conclusion
Altera did perform up to the mark; still the company is in a good financial position and with the recent growth in its operational segments, a better performance can be expected from it in future. But Altera can face good competition with Xilinx Inc. which is in a better financial position that Altera with EBITDA of 861.33 million. Moving on, Altera also lacks in the flexibility as Xilinx’s revenue (2.42 billion) is definitely more than Altera’s revenue (1.93 billion). But, as per price to earnings ratio Altera (23.59) is definitely a better option than Xilinx (17.10).
Moving to the fundamentals, the stock is reasonable with a trailing P/E of 23.59 while the forward P/E of 18.59 shows good growth in earnings in the near term. Besides this, Altera has an attractive and strong profit margin of 24.46% which can attract many investors despite weak performance by the company in the fourth quarter. Considering these facts it can be said that though Altera finished fiscal 2014 on a soft note yet its prospects for 2015 are strong and is definitely a stock in which to invest as of now.
