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Here's Why Holding Xilinx Can Give Solid Returns in 2019

Zacks Equity Research

As 2018 comes to a close, we believe, this is the apt time to make your investment plans for the upcoming year.

A prudent investment decision involves buying stocks with solid prospects and selling off those that carry risks. At times, it is rational to hold certain stocks that have enough potential but are weighed down by tough market conditions.

Here we will discuss the performance of Xilinx XLNX, a stock with an expected long-term earnings per share growth rate of 9.5% and a Growth Style Score of B. Notably, the company has returned approximately 26.4% this year, outperforming the industry’s growth of 17.6% and the S&P 500 Composite’s decline of 12%.

Year-to-Date Price Performance

We note that the company delivered a positive surprise of 8.74% in the trailing four reported quarters. This apart, an encouraging outlook provided during the last quarterly earnings conference call also makes us optimistic about the stock’s near-term performance. The Zacks Consensus Estimate for fiscal 2019 earnings of $3.29 has remained stable in the past 30 days.

What’s Driving the Stock?

Xilinx is benefiting from growth across majority of the end markets. Solid performances of its Data Center and TME, Industrial, Aerospace and Defense and Communications businesses are buoying investor confidence in the company’s near-term prospects.

Growth in wireless and wired businesses owing to LTE upgrades, early deployment of 5G in Korea and preparation for 5G deployment in both China and North America augur well for the company.

Moreover, Xilinx’s ongoing transition from a field programmable gate arrays (FPGA) provider to an all-programmable devices producer has been helping it gain a potent market share and counter stiff competition from the likes of Intel INTC.

We are optimistic about the surge in demand for Xilinx’s Ultrascale+ FPGAs among data-center operators for providing FPGA-as-a-Service (FaaS). Amazon AMZN was the first to use Xilinx chips and started offering FaaS in May 2017. On the last earnings call, management mentioned that Amazon Web Services doubled its FaaS availability zones to 8.  Moreover, the company’s leadership position in the Chinese market with regard to FaaS expanded with Alibaba BABA moving from beta to general access.

Xilinx’s string of successful product portfolio also looks impressive. Significantly, the company’s first and second generation Zynq products hit a new sales record in the last reported quarter, growing 76% year over year, driven by robust demand in the automotive, industrial, communications and data center markets.

It is important to note that Xilinx unveiled Alveo, a suite of accelerator cards, aimed at enhancing the performance level and productivity of industry-standard servers across cloud and on-premise data centers. Recently, the company expanded its Alveo portfolio with Alveo U280 high bandwidth memory accelerator card. The company expects Alveo revenues to start improving from the second half of fiscal 2019 and be a significant driver in the year after.

Therefore, we consider Xilinx to be a profitable technology stock, which investors should keep in their portfolios. The stock carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Xilinx, Inc. Price and Consensus

Xilinx, Inc. Price and Consensus | Xilinx, Inc. Quote

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