Analyst Insight: Morgan Stanley Initiates Coverage Of MaxLinear With $21 PT

Morgan Stanley analysts are initiating coverage of MaxLinear (NYSE:MXL) with an overweight rating and a $21 price target. Analysts Sanjay Devgan and Matthew Nerlinger said, "We expect three key debates to drive the stock: 1) What is a sustainable revenue growth rate? Given MXL is relatively small ($71 mn in 2010 revenue) and has limited operating history, we expect considerable debate on its sustainable growth rate; we believe it can support 30-40% YoY sales growth in the next 3-5 years. 2) Can MXL maintain premium gross margins? MXL's target model assumes mid-60's GM and 20%+ OM; we expect ASP pressure as competitive offerings emerge, but believe MXL's cost and performance leadership will allow it to maintain target model profitability. 3) Will the analog silicon tuner become integrated into the digital video processor? We think integration is unlikely, because device physics prevents shrinking tuners at the same rate as video processors." The bank sees fiscal 2010 EPS of $0.24 and fiscal 2011 EPS of $0.64.