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Xilinx (XLNX) Rallies on Impressive Q3 Results & Upbeat View

Zacks Equity Research

On Jan 25, Xilinx XLNX was upgraded to a Zacks Rank #1 (Strong Buy). Shares of the company scaled a new 52-week high of $107.65, eventually closing at $106.6 on Jan 24. Moreover, shares gained about 18.4% in yesterday’s trading session.

Investors seem to be impressed by the company’s third-quarter fiscal 2019 performance wherein both earnings and revenues outpaced the Zacks Consensus Estimate and also witnessed a year-over-year improvement. This upside can be attributed to the company’s strength in Advanced Products, which soared 51% year over year, and broad-based growth across most of its end markets.

Looking forward to the fiscal fourth quarter, Xilinx expects revenues to be in the range of $815-$830 million. This is ahead of the Zacks Consensus Estimate of $775.5 million.

Notably, the stock has appreciated 52.1% in the past year versus the S&P 500 Composite’s decline of 7%.

 

 

Rationale Behind the Share Rally

Xilinx is witnessing a strong uptick in the Communications market, driven by an improved Wireless business, which is benefiting from early 5G production, pre-5G deployments and LTE upgrades. Notably, 5G deployments in South Korea and a very early start of ramping up the 5G deployments in China are key drivers. The growing usage of Zynq RFSoCs and ACAP products for 5G deployments by both basebands and radios is a positive.

Additionally, major design wins from hyperscalers globally for accelerating applications beyond FPGA as a Service (FaaS) enhanced results. The company’s software defined development environment, SDAccel, is helping it stay ahead of Intel INTC in datacenter acceleration. Notably, with regard to FaaS, the company recorded additional engagements beyond previously announced deployments with Amazon AMZN, Alibaba BABA and Huawei.

Xilinx also expanded its portfolio of Alveo accelerator cards with U280 products apart from U200 & U250. The company projects modest revenue growth from Alveo this year but expects it to be a more meaningful contributor in the next fiscal year.

Xilinx’s ongoing transition from a field programmable gate arrays (FPGA) provider to an all-programmable devices producer is aiding it to gain a sizeable market share. To this end, its newly launched 7nm ACAP (Adaptive Compute Acceleration Platform) Versal platform is touted to be a game changer.

The above-mentioned tailwinds have raised investors’ optimism on the stock and will likely boost the company’s share price in the coming days.

Xilinx, Inc. Revenue (TTM)

Xilinx, Inc. Revenue (TTM) | Xilinx, Inc. Quote

You can see the complete list of today’s Zacks #1 Rank stocks here

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