Shares of Xilinx Inc. (XLNX) reached a new 52-week high of $40.33 on Tuesday, May 28, 2013 following a strategic collaboration, industry recognition and decent fourth quarter 2013 results announced on Apr 24.
The closing price of the technology services provider on May 28 was $39.96, representing a solid one-year return of about 22.76% and a decent year-to-date return of about 7.74%. Average volume of shares traded over the last three months stands at approximately 3049K.
Xilinx delivered positive earnings surprises in the last four quarters with an average beat of 5.95%. This Zacks Rank #3 (Hold) company has a market cap of $10.5 billion and a long-term expected earnings growth rate of 12.0%.
Collaboration & Recognition
Last week, Xilinx announced a collaboration with electric wire and optical fiber cables manufacturer Sumitomo Electric Industries Ltd. The alliance will allow Xilinx to deliver an advanced and cost effective solution (SmartCORE IP) for the wireless communication end market.
The communications end market happens to be the largest end market for Xilinx and currently the ramp in 4G LTE deployments is creating a growth opportunity for Xilinx (4G base stations prefer using FPGAs). We believe that with the SmartCORE IP solution, Xilinx’s share in the wireless communication market will grow.
In another development, Xilinx announced that its 7 series FPGAs and Zynq-7000 All Programmable SoCs (system on chips) have received approval from PCI-SIG (Peripheral Component Interconnect Special Interest Group) and become PCI Express compliant. The PCI-SIG is an electronics industry consortium responsible for specifying the Peripheral Component Interconnect (PCI), PCI-X, and PCI Express (PCIe) computer buses.
With this, Xilinx’s 7 series FPGAs and Zynq-7000 All Programmable SoCs will be compliant with PCIe Gen 2 and Gen 3 specifications.
Decent 4Q, View Positive
Xilinx reported adjusted earnings of 47 cents per share, surpassing the Zacks Consensus Estimate by 4.4% and the year-ago quarter by 6.4%. The beat was mainly attributable to tight cost control and lower tax rate.
Revenues of $532.2 billion fell 4.8% year over year due to weaker-than-anticipated sales from Industrial, Aerospace & Defense and Consumer & Automotive end markets, partially offset by better performance in the Communications & Data Center end markets. However, Xilinx witnessed sequential revenue growth.
New product sales increased 86.0% year over year, driven by higher sales of Kintex-7 and Virtex-7 FPGAs. Xilinx stated that its 28 nanometer families gained much traction during the quarter. But the company generated soft revenues from Mainstream and Base products.
Guidance
Xilinx provided a positive view for the next quarter and expects favorable contributions from all end markets and 28-nm portfolio. Xilinx also announced plans to ship 20-nm product portfolio, including the next-generation 8 series All Programmable FPGAs and second generation of 3D ICs and SoCs by the June quarter.
Estimate Revision
Despite growth potential and positive news flow, the Zacks Consensus Estimate for fiscal 2014 and 2015 remained unchanged at $2.00 and $2.30, respectively over the past 30 days. This was mainly due to some positive estimate revisions, offset by some negative estimate revisions. Two estimates each were revised upward for fiscal 2014 and 2015 in the last 30 days, while 4 estimates and 2 estimates were revised downwards for 2014 and 2015, respectively.
Downward revisions could reflect some weakness in the Industrial, aerospace and defense and communications end markets.
Conclusion
Xilinx’s leadership in 28nm nodes is encouraging. Also, the shipment of 20nm nodes and expected recovery in the semiconductor market are catalysts.
Other Stocks to Consider
Other stocks in the technology industry that are currently performing well and have a good visibility include Integrated Device Technology Inc. (IDTI), OmniVision Technologies Inc. (OVTI), with a Zacks Rank #1 (Strong Buy) and Atmel Corp. (ATML), with a Zacks Rank #2 (Buy).
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