UPDATE: Imperial Initiates Coverage On Atmel On Encouraging Metrics

In a report published Wednesday, Imperial Capital analyst Ashok Kumar initiated coverage on Atmel (NASDAQ: ATML) with an Outperform rating and $10.00 price target.

Kumar remarked that Atmel business model has turned the corner following two years of revenue declines and stabilizing margins.

The analyst wrote, “Atmel has realized gross margin expansion from the roll-off of its foundry agreements and operational efficiencies with the benefits continuing to accrue through 2014. Other encouraging metrics that we highlight from 1Q14 results include a favorable outlook for growth in core microcontroller (MCU) and touch as well as improvements in inventory levels.”

Although the company maintains confidence that shares will benefit from smartphone and tablets in 2014, Imperial's checks indicate “that Cyprus has displaced Atmel for the touch screen controller in the upcoming Samsung Galaxy S5 Mini.”

After supplying the chips for the S4 Mini, Kumar is optimistic on the company's touch opportunities in smartphones, automotive and Win8 large touchscreens. The analyst believes the MaxTouch business may contribute to healthy financial results.

Shares of Atmel closed at $8.20 on Wednesday.