Xilinx (XNLX) Investors Have Buyout on the Brain, But Management Focused on Business - MKM
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MKM Partners analyst Ian Ing raised his price target on Xilinx (NASDAQ: XLNX) to $55.00 (from $52.00) but maintained a Neutral rating after hosting a non-deal roadshow in Minneapolis with Xilinx and its CFO, Lorenzo Flores, and Senior IR Director, Rick Muscha. Ing said while investors are thinking 'takeout', the company is focused on winning new business.
Ing noted the company highlighted its recent target of $750M in incremental revenue in the next 5 years via 4 growth drivers ($500mn) and share gains ($250mn) via manufacturing leadership. The company expects better EPS fall through "relatively soon," as investments fall away and revenues likely outgrow. FY17's elevated R&D investments (OpEx up 7-9% Y/Y) should be viewed as a "discrete event," the analyst noted.
On M&A, Ing notes investors widely believe that mid-sized, asset-light XLNX is the next M&A target in semi consolidation. While positive on the multi-year opportunities available to XLNX, they note many investors are less patient and await more immediate catalysts.
Ing said Xilinx continues to operate under the assumption that it will not be sold, though management acknowledges the dynamic facing medium-sized companies. He said while they have no particular insight from the meetings, Xilinx remains highly strategic to Qualcomm (NASDAQ: QCOM) and then Broadcom (NASDAQ: AVGO).
Shares of Xilinx closed at $54.19 yesterday.
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