Zacks Investment Research now holds a cautious view on semiconductor manufacturer TriQuint Semiconductor, Inc. (TQNT), as evident from its Zacks Rank #3 (Hold).
There is concern surrounding the possible weakening of margins in the short run following the merger of TriQuint with RF Micro Devices Inc. (RFMD) owing to operational and integration risks.
The combined entity may be required to overcome the product and market overlap hurdle, which may arise due to the operational similarities between the two companies. Also, TriQuint has recently seen some softness in its BAW and TC SAW filter markets, and there may be more friction ahead as well.
The merger, announced in February this year, has received concerned regulatory and shareholder approvals and will be closed today. The two semiconductor makers will form a new entity known as Qorvo, which will trade under the symbol QRVO effective Jan 2, 2015.
The merger is largely expected to be extremely synergistic for TriQuint, as Qorvo will boast a broad product portfolio with a more cost-efficient operating model. Owing to this optimism, TriQuint shares have appreciated a whopping 240% this year.
Perhaps the current valuation seems a bit too rich, and it would be better to stand on the sidelines and assess whether TriQuint’s much-hyped merger can deliver on the investors’ and analysts’ expectations.
Better-ranked semiconductor companies include Broadcom Corp. (BRCM) and Nitto Denko Corporation (NDEKY), both carrying a Zacks Rank #1 (Strong Buy).
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