TowerJazz set to become world’s No. 1 specialty foundry

Chardan Capital Markets analyst Jay Srivatsa predicts that TowerJazz (Nasdaq: TSEM; TASE: TSEM) will overtake Taiwan’s Vanguard International Semiconductor Inc. (Taipei: 5347), as the number 1 specialty foundry by the end of 2011. Vanguard’s fourth quarter revenue fell 29% from the preceding quarter to $3.4 billion, whereas TowerJazz is set to achieve 70% revenue growth in 2010 over 2009.Srivatsa reiterated his “Buy” recommendation for TowerJazz with a target price of $2.75, a 95% premium on Friday’s close of $1.41 on Nasdaq. He says, “With several of the foundry companies as well as TowerJazz’s customers enjoying a strong fourth quarter, we are comfortable with street consensus revenue and non-GAAP earnings per share estimate of $135 million and $0.14, respectively.”

Srivatsa’s own prediction for TowerJazz is below the consensus; he believes that the company will report $134.9 million revenue on $0.12 and non-GAAP earnings per share. For 2010 as a whole, he predicts non-GAAP earnings per share of $0.55 on $509.1 million revenue.

Srivatsa believes that seasonal weakness by TowerJazz customers will reduce the company’s the first quarter revenue by 5% compared with the fourth quarter. However, for 2011 as a whole, he predicts 15% revenue growth to $571.8 million, although non-GAAP earnings per share will dip to $0.55.

Tower’s share price rose 1.8% by midday on the TASE today to NIS 5.28.