Conexant Shares Leap After Upgrade

Shares of Conexant Systems Inc. jumped Thursday in heavy trading after Morgan Stanley Dean Witter upgraded the Newport Beach semiconductor company’s stock.

In a research note, Morgan Stanley upgraded the stock to strong buy from outperform, giving it a $100 price target. The note said the stock is significantly undervalued and attractive.

After gaining nearly 20% in early trading, the stock closed at $48, up $6.50 a share, or nearly 16%. A total of 22.3 million shares changed hands on the Nasdaq market, making Conexant the sixth most active stock in U.S. markets.

The Morgan Stanley note was “probably the catalyst” for Thursday’s surge, said Drake Johnstone, an analyst with Davenport & Co.

He added that the stock had pulled back into the high $30s earlier in the week amid broader concern about retail sales and slower growth in the computer modem sector.

But the company assured analysts it is on track to meet the consensus earnings estimate of 22 cents a share for the fiscal third quarter ending in June, Drake said.

“The semiconductor sector is one of hottest sectors,” he said. “Conexant’s valuation is pretty reasonable. Other companies are trading at much higher multiples of growth.”

Despite the gain Thursday, the shares are far below the 52-week high of $132.50 reached on Feb. 16.