CYPRESS – SPANSION Merger
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Transcript of CYPRESS – SPANSION Merger
CYPRESS Semiconductor: NASDAQ (CY)
Spansion Inc. – NYSE: CODE
Chart Pattern: Was consistently running within the range before the M&A news (See chart)
RSI: Currently above 70% - overbought level. MA Bullish-crossover. MA20 crossed both
MA50 and MA100 MACD: Strong uptrend since Oct-14. Showing
strong uptrend momentum.
VSA: In 2014, whenever there is elliot wave down trend, it’s usually accompanied by a low volume, while right after of these downtrend ended, there will be a huge spinning candles with high volume Suspect involvement of BBs.
Chart Pattern: Generally been on uptrend since 2013.
RSI: Currently above 70% - overbought level. MA Bullish-crossover. MA20 crossed both
MA50 and MA100 MACD: Strong uptrend since Oct-14. Showing
strong uptrend momentum.
VSA POV: Huge buying pressure for the last 2 days. Opposite from CY, their downtrends in 2014 is usually accompanied by huge volume with bearish candles.
Incomes:
Sterne Agee: With Cypress in the driver’s seat CEO TJ Rodgers rolls out a
long-term roadmap If the company can pull the deal synergies ($135 million) to
year 2, the combination could drive roughly $1.50 in earnings per share (EPS) and an over $18 valuation.
The companies have a 45% to 55% market overlap, and Cypress can drive a better scale of combined businesses with cost reductions in selling and administrative expenses, which in turn would drive synergies
Other analysts made calls on the merger as well: Pacific Crest upgraded shares from Sector Perform to Outperform with a
price target of $15, also saying the deal gives it needed operational scale with consolidated revenue of over $2 billion.
J.P. Morgan cautions that the merger could take a full three years for the company to realize some of the $135 million in cost synergies they predict.
Topeka Capital Markets raised shares from a Hold rating to Buy with a price target of $13.
S&P Capital IQ raised its rating to Buy from Hold and raised its target price to $15, because it sees significant scale and complementary product offerings and opportunities in the areas like automotive and industrial. The firm positively views the $135 million in potential annual synergies and expects Cypress to benefit from a lower cost manufacturing footprint. The deal is seen closing in the second quarter and the annual dividend is considered safe despite the higher share count after the deal.
Recommend: Buy
Entry Point: $11.66 (Waiting for retracement) Entry Point 2: $13.14 (2013 Highs) Stop Loss: $10.73 (Price level before the gap-
up)
Caution: December Effect
Merger would be more likely to finish mid 2015
Cost- synergies effect could take about 3 years to realize.
Thank you for your attention.