JP Morgan initiates Alphawave with 'overweight' rating

JP Morgan initiated coverage of Alphawave IP with an 'overweight' rating based on expectations that earnings will double each year over three years.

Alphawave floated on the stock market in May and in an update on 14 June said it had a record first half with bookings of more than $190m. The company was founded in 2017 and uses digital processing to speed up connectivity as the growth of devices and digital integration puts pressure on existing connections.

JP Morgan said Alphawave had strong growth and profitability and returns higher than the sector average, driven by its early stage and very strong growth in its end markets. Earnings before interest, tax, depreciation and amortisation are set to increase at a compound annual growth rate of 105% between 2020 and 2023, the bank said.

"Alphawave IP’s return on invested capital is very substantially higher than semiconductor peers hence the company deserves a higher multiple in our opinion," JP Morgan analyst Sandeep Deshpande said in a note to clients.

Deshpande set a target price for December 2022 of 450p compared with a 331p price when the note was published.

Alphawave has predicted the market for its existing products would grow to $1.5bn in 2025 from $500m in 2020 and the market for future products would be more than $50bn by 2024.