Cypress Semiconductor Corporation’s (CY) price target has been increased by about 33.3% to $16 per share from $12 by investment bank Barclays Capital. In addition, Barclays Capital’s Blayne Curtis reiterated an Equal-Weight rating on the stock.
Curtis is optimistic about the synergies associated with Cypress' merger with Spansion Inc. (CODE), announced recently.
Cypress inked a definite $4 billion all-stock, tax-free agreement to merge with Spansion on Dec 1. The merger is expected to create a global provider of microcontrollers and specialized memory chips for embedded systems and generate more than $2 billion in annual revenues. In fact, the analyst expects it to bring in $135 million in synergies, along with opportunity for increased savings, namely in fabrication consolidation and sales.
The deal amalgamating two major players of the global chip industry will be one of the biggest technology mergers in recent years. The analyst expects the deal to offer customers a full suite of MCU products, leading to revenue growth. Also, growth in the core business will drive substantial value creation for shareholders of the combined entity, going ahead.
Therefore, Barclays also raised the price target on Spansion by about 33.3% to $40 per share from $30, to reflect the benefits from the synergy.
Though the deal has been approved by shareholders of both the companies, it is still under anti-trust review by several regulators. The transaction is expected to close in the first half of 2015 after the regulatory approval.
Cypress is a semiconductor company, offering high-performance, mixed signal and programmable solutions. The company reported decent earnings with revenues surpassing the Zacks Consensus Estimate driven by solid expense management.
Cypress currently has a Zacks Rank #2 (Buy). Other stocks that are performing well include Nitto Denko Corp. (NDEKY) and TriQuint Semiconductor, Inc. (TQNT). Both the stocks sport a Zacks Rank #1 (Strong Buy).
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