On May 2, Cavium Networks (CAVM), which makes semiconductors used by communications equipment vendors such as Cisco Systems (CSCO) and F5 Networks (FFIV), was taken public by Needham & Co., Lehman Brothers, JMP Securities, Thomas Weisel Partners, and Morgan Stanley, and today — Surprise! — four of the five bankers initiated coverage with enthusiastic views for the company’s technology, but rather lackluster views on the shares, which are expensive.

Thomas Weisel Partners’s Jeremy Bunting says Cavium’s customers will become increasingly dependent on the company’s chips because of high switching costs to use competitors’ chips, and that “stickyness” should help Cavium gain more and more of Cisco and others companies’ business over time. Still, trading at 47.3x Bunting’s estimate for 42 cents a share in profit next year, the stock is fairly valued, he says, and he gives the stock a Market Weight rating.

Lehman Brothers analyst Tim Luke is, like Weisel’s Bunting, somewhat reserved, giving the shares an Equal Weight rating. He says that while Cavium is becoming a leader in a new category in high performance security and networking chips, and its sales growth is impressive, the stock would be better bought on a pullback. His target for the stock is $22.

Needham & Co.’s N. Quinn Bolton is a bit more excited, giving the shares a Buy rating and a $25 12-month price target, or 25% above the current price. Bolton says the company’s chips are “uniquely positioned” to make network switches more aware of the applications data that flows through those switches, and that the company’s chip designs will be able to sell into a range of equipment from high-priced to low-priced. His discounted cash flow model is the basis for the price target, and his 45 cents a share estimate for next year is slightly higher than Bunting’s, giving the stock a $43.8x forward P/E — still rather rich in my view.

Cavium shares today are up about 1% at $20.06. The shares are up about 22% since last month’s public offering.

Addendum:
JMP Securities’s Krishna Shankar, like Needham’s Bolton, also has a $25 target for the shares and a “strong buy” rating. To get there with a sane-looking multiple, Shankar is projecting out to the fiscal year ending Dec. 31 2009, 2.5 years away, which at $25 would give the stock a 39x forward P/E based on projected earnings per share — not counting stock options expenses — of 65 cents. Shankar says Cavium will be helped by Web 2.0 traffic — lots of application data being carried in Internet Protocol packets that needs to be parsed, I suppose — and Internet Telephony and other cutting edge applications. “Cavium is well positioned to rapidly gain share in the $5.8 billion 2006 wired communications chip market,” says Shankar, “which we believe is likely to surpass $7.3 billion by 2010.

Deutsche Bank’s Arnab Chanda says Cavium “is the current market share leader in the security processor market and should benefit from growth in its network processor product line,” and he has the highest price target of the bunch, at $26. Chanda says the company should grow sales 50% per year on average through 2009, and be able to maintain gross profit margin of 63%, which is relatively high for a semiconductor company. Chanda says that 50% growth justifies a premium forward P/E of 35x, and like JMP’s Krishna, he’s going all the way out 2.5 years to his estimate of 2009 profit per share of 75 cents. Moreover, Chanda projects the company’s free cash flow per share will soar from 40 cents a share this year to $1.90 next year and $2.89 per share in 2009.