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Valued at $6.28 billion by market cap, Rambus Inc (RMBS) is a semiconductor products provider, focused on designing, developing, and licensing chip interface technologies in collaboration with leading ASIC and SoC designers, foundries, IP developers, and EDA companies. Rambus has a broad portfolio of silicon IP that includes roughly 2,700 patents and applications.
RMBS stock has emerged as a strong performer, with the shares boasting a 10-year return of 431% and a five-year gain of 350%. By comparison, the S&P 500 Index ($SPX) is up 195% over the last decade, and about 92% in the past five years.
In 2024 so far, however, Rambus shares have shed roughly 17%, underperforming the broad-market index.
The shares are already up by 51% from their September year-to-date lows, though, thanks in part to a broadly enthusiastic reaction to the semiconductor company's late-October earnings report.
RMBS Rallies After Earnings
RMBS stock spiked 13.8% on Oct. 29 as investors reacted to third-quarter results from the company. Rambus reported a profit of $48.7 million, or $0.50 per share on an adjusted basis, while revenue totaled $145.51 million, up 38.2% YoY. Billings reached $65.4 million during the quarter, while product revenue arrived at $66.4 million. Contract and other revenue accounted for $15.0 million.
During Q3, Rambus generated $62 million in cash from operations, and repurchased $50 million worth of stock, ultimately ending the quarter with an unchanged cash balance of $432.7 million.
“Building on our strong execution and strategic investment in new leadership products, we introduced the industry’s first complete chipsets for industry-standard DDR5 MRDIMM 12800 and RDIMM 8000 to address the rising performance needs of the data center and AI," said CEO Luc Seraphin. "These new chips represent a significant expansion of our addressable market and support the company’s long-term growth.”
Management guided for Q4 revenue in the range of $54 million to $60 million, licensing billings at $57 million to $63 million, and silicon IP growth at an annual rate of 10% to 15%. Non-GAAP operating profit is expected to be around $68 million and $78 million, and product gross margin between 61% and 62%.
Analysts Says RMBS is a ‘Strong Buy’
Wall Street has been weighing in with bullish notes on RMBS following the Q3 earnings report. The stock now has six “Strong Buy” recommendations from analysts, up from 3 “Strong Buys” a month ago, with experts unanimously giving the AI data center stock their top rating.
Baird analysts led by Tristan Gerra initiated coverage at “Outperform” on Nov. 26, citing strong prospects for Rambus based on its “first-to-market solutions addressing performance bottlenecks between processor and memory.” The firm believes Rambus stock “should be a core holding within the AI-enabling memory technologies investment thesis.”
The brokerage firm also set a price target of $90 for Rambus shares, representing a new Street-high. Wall Street's average price target for RMBS is $71.33, suggesting the stock can rise 21.4% from current levels.
