Analyst Daniel Niles believes the stock dropped 8%, unnecessarily, on Friday, largely amid industry concerns that Nortel will begin designing power semiconductor products in-house. He thinks this news is "immaterial" to International Rectifier, which generates only 6% to 7% of total revenues from communications, and less than 2% from Nortel.
With 80% of its backlog covered, inventories at a three-year low, and positive data from customers National Semiconductor, Fairchild Semiconductor, Texas Instruments, and ON Semiconductor, Niles says the first quarter is on track for 3% growth (+ or -3%). He also thinks International Rectifier's second quarter will be solid, as roughly 70% of its business should uptick.
Niles sees 26 cents first-quarter earnings per share, and $1.28 in fiscal 2004 (June). He rates the shares equal-weight.