Citi Comments on Freescale Semiconductors

Citi has published a report on Freescale Semiconductor Holdings (NYSE: FSL).

In the report, Citi wrote, "While we expect little sympathy for Freescale's miss in its first quarter as a newly public company, we view the automotive issue as industry-wide (as we noted post-MCHP's negative pre-announcement) and temporary in nature. And despite the revenue shortfall, we are encouraged that gross margin is improving, underscoring the resiliency of the model to temporary disruptions. We continue to see potential for Freescale to deleverage its model, noting that free cash flow was positive and cash balances are already above our model (recall every 100bps of interest expense reduction is $0.02 in EPS). Now trading at 8.1x our GAAP 2012 EPS, 6.9x non-GAAP, we view any incremental share price weakness, especially if driven by a temporary non-company-specific issue, as an enhanced buying opportunity."

Citi rated Freescale Semiconductors a Speculative BUY with a price target of $26.00. Freescale Semiconductors closed Wednesday at $17.19.