Tag Archives: avgo

Mellanox Tanks On Q2 Guidance, But ‘Well Ahead’ Of Intel, Broadcom

Mellanox Technologies ( MLNX ) stock dove Thursday on weaker-than-expected Q2 guidance late Wednesday, but analysts say the IBD Leaderboard stock won’t succumb to competition from “large incumbents” Intel ( INTC ) and Apple ( AAPL ) supplier Broadcom ( AVGO ). Summit Research analyst Srini Nandury calls Mellanox stock “the name to own in this space,” talking about the Ethernet and Infiniband markets. But Mellanox stock was down 14% in midday trading on the stock market today , at a two-month low below 48. For Q1, Mellanox reported 81 cents earnings per share ex items on $196.8 million in sales, up a respective 35% and 34%. Both metrics topped the consensus of 14 analysts polled by Thomson Reuters for 75 cents and $191.7 million. IBD take: Mellanox is a big mover today, and the move is down, but it had been doing well. The Q2 guide was Wall Street’s sticking point, Credit Suisse analyst John Pitzer wrote in a research report, though he retained an outperform rating and 60 price target on Mellanox stock. Current-quarter sales guidance for $210 million to $215 million, up 30% at the midpoint, was slightly short of Wall Street expectations for $214.6 million, Pitzer wrote. Q1 was Mellanox’s seventh consecutive beat and fourth straight of record quarterly revenue, Piper Jaffray analyst Andrew Nowinski and Summit Research analyst Srini Nandury wrote in separate reports. Nowinski maintained his overweight rating and 65 price target on Mellanox stock. Nandury rates Mellanox stock a buy and also has a 65 price target. Both note Intel’s Omnipath isn’t, so far, holding a candle to Mellanox’s 100-gigabit/second (Gb/s) Infiniband product. Omnipath is also 100 Gb/s, but Mellanox is on track to launch 200-Gb/s and 400-Gb/s products in 2017 and a 1-terabit/second (Tb/s) product early next decade. “Mellanox is seemingly ahead of everybody in the market and is executing flawlessly on the Infiniband road map,” Nandury wrote. He said Mellanox is the only OEM to deliver 25/50/100-Gb Ethernet adapters in addition to switches, “well ahead of Broadcom.” Intel stock was down a fraction and Broadcom stock down 1% midday Wednesday. No. 1 chipmaker Intel, late Tuesday, reported mixed Q1 results on a minimal year-over-year climb in PC sales and announced it would lay off 12,000 in an effort to focus on stronger segments.

Apple Suppliers Downgraded On ‘Modestly Lower’ iPhone Demand

Petering Apple ( AAPL ) and Samsung demand prodded a Raymond James analyst to downgrade suppliers NXP Semiconductors ( NXPI ), Qorvo ( QRVO ), Skyworks Solutions ( SWKS ) and others, even with the iPhone 7 launch expected in September. Apple suppliers broadly fell in morning trading on the stock market today . Radio-frequency chip companies Qorvo and Skyworks were down 2.6% and 2.2%, respectively, on the downgrade, tugging rival Broadcom ( AVGO ) down 1.3%. Maxim Integrated Products ( MXIM ) stock was down more than 1%, while Apple suppliers Analog Devices ( ADI ), NXP and Texas Instruments ( TXN ) stocks were all down roughly 1%. In all, Raymond James analyst Steven Smigie downgraded six semiconductor stocks to outperform from strong buy, citing likely in-line earnings and minimal upside to June guidance. Following a January drop in the stocks, the Philadelphia Stock Exchange Semiconductor Index has rebounded 20% since mid-February, Smigie wrote in a research report. Some stocks have run up 40%, he noted. But “with only modest signs that there is the potential for near-term upside to (earnings per share), and some signs of modest downside, we worry that shares have a limited upside, with reasonable downside risk,” he wrote. Confidence could improve in the seasonally stronger second half of 2016, when Apple typically launches its newest iPhone flagship. But “Apple is seeing modestly lower demand,” said Smigie, who questioned the likelihood of a positive June guide by Apple. He also noted some pain points for radio-frequency suppliers that have more than 45% exposure to Apple. “Even if the Apple guide is healthy, we think skepticism will remain until the summer when we start to get evidence of the iPhone 7 ramp and questions about iPhone SE cannibalizing other iPhone models get resolved,” he wrote. Bright Spot For Chip Outlook Samsung sales zoomed on its Galaxy S7 flagship, but pre-orders were likely influenced by free Gear VR (virtual reality) giveaways, Smigie wrote. Huawei, on the other hand, is a “bright spot” and recently guided to 120 million to 140 million units in 2016. The lion’s share of those units will be high-end smartphones, Huawei said. Outside mobile, PC and industrial results have been weak, offsetting some strength in the growing automotive and infotainment arenas — the latter being NXP’s bailiwick following its acquisition of Freescale Semiconductor. But even in the automotive segment, “we have heard concerns from a number of investors on subprime lending,” Smigie wrote. Until those fears level out, automotive-exposed semiconductors could face some headwinds. Respective estimates from industry trackers Gartner and IDC show the PC segment saw 9.6% and 11.5% year-over-year declines in Q1 shipments. And March industrial production fell 0.6% vs. expectations for a 0.1% decline, says Smigie. Smigie notes positively, “we still like many of the stories, however, so all else being equal, on a pullback we could look to get more aggressive again.”

Goldman Sachs Calls 5G Winners: Verizon, Cisco, Intel, Broadcom

Verizon Communications ( VZ ) and AT&T ( T ) could shake up the U.S. residential broadband market by 2020 by deploying 5G wireless services to homes, challenging cable TV firms Comcast ( CMCSA ) and Charter Communications ( CHTR ), says Goldman Sachs. While 5G is expected to provide much faster data speeds, another market opportunity for AT&T, Verizon and T-Mobile US ( TMUS ) will be applications that require always-on, low-data-rate connections, says Goldman Sachs in a new research report. The apps involve data-gathering from industrial sensors, home appliances and other devices often referred to as part of the Internet of Things. Simona Jankowski, a Goldman Sachs analyst, says that some chipmakers, network gear suppliers and software companies will see an upside in 5G deployment. Jankowski says that Broadcom ( AVGO ), Qualcomm ( QCOM ), Intel ( INTC ), Cisco Systems ( CSCO ), cell tower operator Crown Castle ( CCI ), and bandwidth service provider Zayo Group Holdings ( ZAYO ) could see upside from 5G deployment. “We expect pre-standard 5G commercial deployments to begin in the U.S. in 2017, when AT&T and Verizon plan to be first in the world to roll out fixed wireless 5G broadband to the home, followed by pre-standard 5G mobile networks in Korea in time for the 2018 Olympics,” wrote Jankowski in the report. U.S. regulators are focused on opening up high-frequency airwaves , also called millimeter wave spectrum, for 5G services. “Europe led the 3G transition, with industry giants such as Ericsson ( ERIC ) and Nokia ( NOK ) leading the way,” said Jankowski. “With 4G, the baton passed to the U.S., driven by a new group of industry leaders such as Qualcomm and Apple ( AAPL ). With China, Korea and Japan targeting 5G rollouts on par with or ahead of their Western counterparts, it bears watching whether the wireless industry’s center of gravity shifts once again (to Asia).” The Goldman Sachs analyst says that 5G also could have upside for Cisco, Intel, Zayo and Crown Castle. “We view Cisco’s market leading position in IoT as a strategic differentiator, given that 5G will likely be closely coupled with IoT,”  Jankowski added. “We expect Intel’s server and networking business to benefit from increased data traffic and greater demand for compute-intensive data analytics. “As the largest operator of small cell networks in the U.S. and one of the largest pure-play providers of dark fiber in large metros respectively, Crown Castle and Zayo look well positioned for this long-term investment cycle.”