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UPDATE: Goldman Sachs Upgrades Xilinx (XLNX) to Buy

September 14, 2015 6:36 AM EDT
Get Alerts XLNX Hot Sheet
Price: $194.92 --0%

Rating Summary:
    8 Buy, 28 Hold, 1 Sell

Rating Trend: = Flat

Today's Overall Ratings:
    Up: 9 | Down: 8 | New: 10
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(Updated - September 14, 2015 8:45 AM EDT)

Goldman Sachs upgraded Xilinx (NASDAQ: XLNX) from Neutral to Buy with a price target of $50. Analyst James Covello thinks comms infrastructure is poised for an inflection and he expects market share gains to continued.

"Our bullish view is based on the following: 1) Semi shipments into the comms market (40% of sales) are undershipping normalized demand by 25%-30%, with Xilinx stating at recent investor events that its wireless sales within comms are at a 7-year low. 2) We expect market share gains to continue over the medium term as the 28nm node continues to grow as a percentage of the industry. 3) Aerospace and Defense revenue (10- 15% of total sales) should transition from a headwind in CY2015 to a tailwind in CY2016 based on the timing of government programs," said Covello.

"We expect comms infrastructure revenue to recover from a low base into 2016. Although visibility into the timing and magnitude of a recovery is limited, our analysis shows that: 1) semi shipments into comms are undershipping normalized demand (using carrier capex as a proxy) by 25-30%, which suggests that supply is lean. When undershipment of 10% or more has occurred in the past, comms revenue has recovered by an average of over 30% in the following year. 2) Inventory dollars in the comms supply chain are down 6% qoq and 10% below the 3-year average; 3) There are early signs of improvement, with catalysts including China Telecom and China Mobile and the beginning of LTE deployments in India. Importantly, we believe that Street estimates for Xilinx are achievable (in contrast to our concern with the rest of the group), as the Street has 3% yoy EPS growth modeled for Xilinx vs. the group at up 16% and Xilinx’s 3-year CAGR of 4%," added the analyst.

For an analyst ratings summary and ratings history on Xilinx click here. For more ratings news on Xilinx click here.

Shares of Xilinx closed at $41.93 yesterday.



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