Buy Volterra Semiconductor (NASDAQ:VLTR) on Weakness Advises Needham

Volterra Semiconductor's (NASDAQ:VLTR) revenue and earnings for the latest quarter came in as expected, and Needham recommends the company be bought on weakness going forward.

Needham says, "VLTR reported Q4 revenue and EPS in line with its pre-announced range and provided an in line Q1 guide for both revenue and EPS. Volterra has 80% backlog coverage for Q1, sees visibility improving and believes the server inventory correction has passed. Topping the list of concerns was a potential shift towards lower GM as Notebook revenue picks up. This was prompted by guidance for a 100 bps downtick for Q1 before reversing as higher GM server revenue contributes more to the mix. This risk is overrated in our view, as is inventory build, which is obviously for the upcoming notebook ramp. The revenue split between Notebook and Server is similar to our forecast with the same Q/Q expectations for Q1 that Notebook would grow and Server decline. The Huron River (Notebook) ramp is starting off better than mgmt originally anticipated and Romley (Server) is still targeted for a Q3 ramp.

"We lowered our 2011 revenue/EPS from $173M/$1.55 to $169M/$1.35 and our 2012 revenue/EPS from $203M/$2.20 to $203M/$2.10. Our 2011 reductions are due to slightly lower GM and OM on a 2% revenue decline whereas 2012 is due to an increase in litigation expense."

Needham & Company reiterates a "Strong Buy" rating on Volterra Semiconductor (VLTR), which closed at $24.18, down $0.63, or 2.54 percent. Needham lowered their price target on Volterra from $35 to $33.