Altera (ALTR) recently updated its outlook for the second quarter of 2010. The company expects revenues to grow around 10%-12% sequentially, at the high end of the previous guidance range of 8%-12%. The revised guidance implies revenue in the range of $442.5 million $450.6 million.
The growth in revenues will once again be driven by new products, as 65-nm FPGAs and especially 40-nm FPGAs continue to report solid growth. Top and bottom line estimates have been steadily increasing in the last three months. The current 2010 Zacks Consensus Estimate is $1.99, up by $0.39 in the last 90 days, driven by its strong earnings performance and upbeat guidance.
Hence, we upgrade the stock to Outperform from Neutral and set a target price of $33, which is derived by applying a target P/E multiple of 16.6x to our fiscal year 2010 EPS estimate.