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FAA and NOAA demand for weather applications will drive approximately $500 million in additional annual revenue over the upcoming five years for IBD Leaderboard stock Macom Technology Solutions ( MTSI ), a Needham analyst said Friday following the chipmaker’s “upbeat” analyst day. Macom stock rose 5.8% on the stock market today , to 43.79 — nearing its all-time high of 44.15, achieved Monday — and extended 5.7% from a 41.42 buy point. IBD’s 41-company Electronics-Semiconductor Manufacturing industry group jumped 2.3% Friday, spurred by Macom. Shares of chip rivals Analog Devices ( ADI ), Qorvo ( QRVO ) and Skyworks Solutions ( SWKS ) — all Apple ( AAPL ) suppliers — rose 1.2%, 2.2% and 3.5%, respectively. Needham analyst N. Quinn Bolton reiterated his buy rating and 46 price target on Macom stock. Barclays boosted its price target on Macom stock to 44 from 41 and maintained an overweight rating. Macom Ogles Vast Growth Optical, gallium nitride (GaN) and active antenna radar could each double Macom’s approximately $500 million revenue over the next three to five years, “potentially driving up to $2 billion of annual revenue by 2020,” Bolton wrote in a research report. “While management was clear the team may not bat 1,000 and that timing of specific product ramps was difficult to accurately forecast, management has clearly set an objective to become a much larger company,” he wrote. Macom’s $2.3 billion market cap puts it distantly behind industry leader Intel ( INTC ) and Intel’s $150 billion market cap. Unlike its Apple-supplying rivals, Macom’s chips aren’t focused on consumer products but instead are used in commercial and industrial applications like cellphone base stations, military radar and lasers. Macom also is developing GaN-on-silicon chips, squaring off with privately held Transform, Infineon Technologies and Efficient Power Conversion (EPC). GaN transistors can turn on and off faster than silicon, can withstand a higher voltage and are markedly smaller. Could Gallium Nitride Take On Silicon? Last year, EPC figured out how to make them cheaper, too, EPC CEO Alex Lidow told IBD in February. Lidow used to head up International Rectifier, which Infineon acquired in 2014. Companies like EPC aim to use GaN in electronic components such as transistors. EPC grows a thin layer of gallium nitride on silicon wafers and, like Macom, it uses the chips in cellphone base stations. “GaN is being used in base stations, going up in Google balloons and Facebook ( FB ) drones,” Lidow said. Other applications include a swallowable colonoscopy pill, autonomous cars ( Alphabet ( GOOGL ) and Tesla Motors ( TSLA ) are among the competitors) and wireless charging. Lidow estimates a $370 billion total addressable market — $30 billion in power, $40 billion in analog and $300 billion in digital. Macom is trying to grab some of it. The company has been in talks with smartphone makers Huawei, Nokia ( NOK ) and Ericsson ( ERIC ) for over a year and just recently completed customer validation, Bolton wrote. “If the commercial contract negotiations go well, management believes the company could generate first production revenue for GaN-on-Si (GaN-on-silicon power amplifiers) by year-end 2016,” he wrote. Macom estimates that it can scoop 40%-60% of the base station power amplifier market over the next three to five years. RELATED: 5 Chip Stocks To Watch, Moving Up, With Apple’s Big Event March 21 Scalper1 News
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