Spreadtrum Communications (NASDAQ: SPRD) is a fables semiconductor company that engages in the design, development and marketing of mobile chipset platforms for smartphones, feature phones and other consumer electronics products in the Peoples Republic of China and internationally. The company was founded in April 2001. It is one of China’s leading mobile IC suppliers and has a strategy that is wrapped about the idea of the development of China’s wireless communications market.
JPMorgan Chase (NYSE: JPM) downgraded Spreadtrum from “buy” to “neutral” despite increasing the price target from $22.00 to $23.00. The memory chip maker reported earnings that failed to meet analyst estimates while Q4 guidance remained bleak. Actually, the analysts from JPMorgan noted that a silver lining could emerge during the second half of Q1 2013.
The analysts said, “Monthly smartphone shipments are peaking in November and we downgrade the stock to Neutral. We recommend investors to revisit the name toward the second half of 1Q13, when there is further clarity on China Mobile’s TD-SCDMA handset procurement planning in 2013, and R&D progress of the dual-core TD-SCDMA smartphone chipset. We roll over price target from $22 as of Dec-12 to $23 as of Dec-13.”
Spreadtrum is expected to register a year-on-year growth rate of just over 6% on its annual sales for 2012, whereas gross profit is expected to decline significantly by about 5%. Operating profit is expected at $100 million for fiscal 2012 as compared to $136 million reported in 2011. Pretax profit is projected at $110 million, which is a decline of $40 million from last year.
The analysts also slashed 3% from their initial forecast on the company’s earnings per share for the next fiscal year, citing lower margin assumptions.
The analysts also foresee a slight improvement during the short transition period in December, which is also the end of the first quarter of fiscal 2013. The analysts noted, “Monthly smartphone shipments will likely peak in November at ~10mn due to the end-2012 TD-SCDMA handset procurement program of China Mobile. China Mobile’s 2013 TD-SCDMA handset procurement plan won’t come out until after the end of next year.” The analysts expect Spreadtrum to ship approximately 100 million units of chipsets in 2013.
Stock Price Movement
On Monday, Spreadtrum opened at $19.45 before gaining marginally during the early trading hours to notch $19.75 per share. The stock then slumped to trade at $19.00 before slipping further to trade at $18.75 around 11 AM. Spreadtrum then gained steadily to close the day at $19.14, down $0.30 per share or 1.5% from Friday’s close. The stock is up 51.5% from its 52-week low of $12.63, and down 36.2% from its 52-week high of $29.98 per share.
Share Movement Volumes
Spreadtrum was very active during Monday’s early trading hours, moving shares in the tens of thousands between 9:30 AM and noon. However, the activity cooled down between noon and 2 PM, but intensified again in the late afternoon until the close of trading. On average, the company has moved 882,422 shares, as per the 3-month moving average.
The company’s main competitors include Infineon Technologies (OTC: IFNNY), Texas Instruments (NASDAQ: TXN), as well as the privately held MediaTek.
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