RF Micro Devices: Capitalize on the Mobile/Wireless Trend

Note of caution: I consider RF Micro to be a high-risk stock not suitable for low-risk/moderate-risk investors.

Look for RF Micro's 2010 revenue to increase 8-10% in 2010 and 5-7% in 2011 on rising demand for radio frequency solutions, driven by 3G smartphones, and new product releases in the expanding mobile/wireless sector; market share gains also should occur.

Meanwhile, adequate cost controls, efficiency improvements, and a reduction in long-term debt add to the positive story.

The First Call FY2010/FY2011 EPS estimates for RFMD are 44 cents to 51 cents. Each looks about 10% low, according to my analysis.

Technically, RF Micro's stock has basically straddled the 50-day moving average for about six months -- a sign of institutional investor indecision. Still, the calculation here is that RFMD will hold support at/near $4.

2010 Outlook: I view RF Micro as a long-term play, but if investors are looking to sell RFMD within the year, it's probably best to take your profits after it rises to $9-9.50, if it fails to rise above $10.

Stock Analysis: I consider RF Micro Devices to be a high-risk stock. If an investor has already purchased the company's shares, I'd hold them. If not, and I was going to buy the stock, I'd consider buying a 50% position in RFMD now; then buy another 25% in one month, if U.S. and global economic conditions don't worsen substantially. Under any circumstance, I wouldn't buy more than 75% of my RFMD position before April 2010 and I'd put a sell/stop loss at: $3.

- -

Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.