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JP Morgan raised its investment recommendation on Lexar Media (LEXR
) to overweight from underweight.
Analyst Paul Coster said that the federal lawsuit against Toshiba, scheduled for the fourth quarter of 2006 hearing, could lead to a settlement or big licensing revenues in 2007, beyond the $465 million jury award that was upheld, which he values at $2.00 per share, but could reach $4 per share. He said that NAND Flash supply-constraint persists, however, and Lexar is probably on plan owing to the long-standing "favored nation" supply contract with Samsung. He added that recent IP agreements with Sony (SNE
)and Memorex suggest Lexar is placing emphasis on high margin (85%+) licensing; therefore, he upped his 13 cents 2006 earnings per share estimate to 14 cents.