Research firm Broadpoint AmTech, which has been on top of the solid rally in specialty chipmakers, yesterday raised its earnings estimates and price target for Omnivision (OVTI), a chipmaker that specializes in imaging silicon for applications such as cameras in mobile phones. OVTI, a favorite of the momentum investing crowd, had huge moves from 2002-2006, but then stumbled badly in 2008. Broadpoint AmTech analyst Doug Freedman seems believes it will rally on faster-than-expected earnings growth tied to smartphone growth and other markets driving the adoption of Omnivision's imaging technology. The favorite speculation among investors now is whether it will gain entry into Apple's i-Business. It could also ride the wave of growth of cameras and imaging technology in smartphones in general.

Broadpoint AmTech this week upgraded Linear Technology (Nasdaq: LLTC) to Buy from Neutral. The reason we think this is particularly interesting is that the upgrade comes from Doug Freedman, Managing Director of Broadpoint, who used to work at Linear Tech. We're not saying he knows any non-public information, of course, but we are saying he knows the company and industry very well and has good sources. He is also the highest ranked analyst covering LLTC, as measured by StarMine. Broadpoint says that the Street consensus is missing the industrial demand part of Linear's business, which is strengthening.Broadpoint's revenue and EPS estimates for Linear are now above that of the the Street consensus. Some highlights of the report:

• Mix-shift growing increasingly favorable. In our view, the Street is missing the magnitude of ongoing industrial (45%+ of sales) strength, the benefits resulting from its lower exposure into competitive high-volume markets (largely consumer-based), and that its focused tier one (Huawei, CSCO) solutions are limited to diverse higher-margin proprietary products.
• Earnings power is underestimated. We expect above-market performance, in-line with our broader Overweight Semi thesis, as the stock is likely to benefit from continuous and steady shipments into under-shipped end-markets, particularly Industrial (late-cycle recovery) and Communications (US and China orders) with possible share gains resulting from sustaining low lead-times (~4 weeks). Consequently, we model more growth for CY1Q10 (now +10% vs. prior +8.5%) and expect a sub-seasonally flat 2HCY10. As such, our FY10 (June) and FY11 pro forma EPS, including SBC, estimates are now $1.51 (vs. prior $1.48, and Street $1.45) and $1.90 (vs. prior $1.79, and Street $1.76) respectively.
• Cost controls likely better than we previously expected. We are increasingly confident that management will be able to maintain flat expenses Y/Y (as a percentage of sales), near 24% in FY11 (vs. our prior 25%). When coupled with higher sales estimates, we believe FY11 Operating Income will increase to 55% (vs. prior 53%).

Broadpoint is generally bullish on semiconductors, but specific to Linear, it points out that the company has good earnings leverage. It expects that growth in the industrial market segment as well as a benefit from Chinese stimulus spending will drive an influx of new orders. If you are looking at the stock, of course, the question is whether this information is already "baked in." If you believe, as BroadPoint does, that there is more earnings leverage in the stock and that 2010 earnings can move to or beyond $1.51, the stock can move up. However, currently, priced at $27, Broadpoint's earnings estimate for 2010gives the stock a forward multiple of 18. So, it's not the cheapest stock on the block.

Technically, the stock has pulled back quite a bit from the highs in the Q4 of 2009, so if you are thinking of taking the plunge, now's the time.

(Disclosure: no position in LLTC)