On Thursday, Rosenblatt initiated coverage on Adeia Inc. (NASDAQ: ADEA) with a Buy rating and a price target of $15.00. The firm highlighted Adeia's impressive profitability profile and growth potential in media and semiconductor intellectual property (IP). Adeia's media IP portfolio is considered essential for a wide range of video platforms, including Pay-TV, over-the-top (OTT) services, social media, consumer electronics, and emerging adjacent markets.
The coverage points to Adeia's semiconductor technologies as a key driver for performance gains and cost reductions akin to Moore's Law. With the limits of Moore's Law in sight, Adeia's advancements are expected to gain wider adoption in the semiconductor industry. Rosenblatt's analysis suggests that Adeia's stock is currently undervalued, trading at eight times next twelve months (NTM) earnings, despite the company's potential for a compound annual growth rate (CAGR) of approximately 5% over the next five years, with an operating margin above 60%.
The firm believes that Adeia's shares have not received the attention they deserve from investors following its spin-off from Xperi (NASDAQ:ADEA) in October 2022. Rosenblatt recommends investors to take note of Adeia, which it refers to as a "30-year-old start-up," as the company is well-positioned to capitalize on the ongoing transition of video to new platforms and the increasing demand for high-performance semiconductors. Adeia's robust technology offerings and financial metrics underpin this positive outlook.
InvestingPro Insights
As Rosenblatt initiates coverage on Adeia Inc. (NASDAQ: ADEA) with a bullish stance, real-time data from InvestingPro bolsters the firm's optimistic outlook. With a market capitalization of $1.18 billion USD, Adeia's valuation reflects a combination of solid fundamentals and growth potential. The company's P/E ratio stands at 17.52, with an adjusted P/E ratio for the last twelve months as of Q4 2023 at a slightly lower 15.71, indicating a potentially undervalued stock relative to its earnings.
InvestingPro Tips suggest that Adeia's attractiveness to investors is further enhanced by its high shareholder yield and a PEG ratio of just 0.15 for the same period, which aligns with Rosenblatt's view of the stock being undervalued. Moreover, the company's strong free cash flow yield is implied by its valuation, making it an even more compelling investment opportunity.
One of the most striking data points is Adeia's robust return of 20.9% over the last three months, reinforcing the notion that the stock has been performing well in the short term. For those looking for longer-term performance indicators, the company has also shown a strong return over the last five years. Additionally, with a consistent dividend payment history spanning 13 consecutive years and a current dividend yield of 1.69%, Adeia may appeal to income-focused investors.
For further insights and to explore additional InvestingPro Tips on Adeia Inc., interested investors can visit InvestingPro. There are 9 tips available to provide a deeper understanding of the company's financial health and future prospects. Plus, use the coupon code PRONEWS24 for an additional 10% off a yearly or biyearly Pro and Pro+ subscription to gain access to exclusive investment analysis tools.
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