Shares of programmable chip maker Xilinx (XLNX) are up 32 cents, almost 1%, at $35.62 following last night’s fiscal Q3 report, which beat estimates, and the company’s forecast for revenue growth this quarter that is higher than analysts have been modeling.
Just about everyone is increasing his or her price targets today, based on higher estimates. But interestingly enough, there were also two downgrades of the stock, one from Deutsche Bank’s Ross Seymore, and one from Miller Tabak‘s Brendan Furlong.
Furlong thinks a short squeeze has helped lift the shares of both Xilinx and competitor Altera (ALTR), and he thinks that’s run its course. Hence, he cut his rating on both stocks to Neutral from Buy:
The stock is up sharply from around $30 in December and is up significantly over the last two days on a short squeeze. Frankly we are surprised by the trading action in XLNX and other semiconductor stocks in the last several days. We did not realize investors were so bearish and short the semiconductor stocks in the face of compelling evidence that the cycle was putting in a bottom. We remain bullish on the secular story for PLD stocks in coming years but see the current squeeze pushing the stocks up to a point where we see limited further upside.
And Deutsche’s Seymore writes that while he’s “encouraged by this positive inflection point being attained, and continue to see Xilinx as regaining share, we believe these attributes were fairly reflected in last night’s aftermarket price of roughly $38.”
Bullish!
Gus Richard, Piper Jaffray: Reiterates an Overweight rating and raises his price target to $39 from $38. “Industrial appears to have bottomed and infrastructure is, on the margin, improving,” he writes. He’s encouraged by new product activity: “XLNX did not breakout its 28nm revenue but indicated it is now shipping 28nm in 4 of its 5 product families at 28nm with 10 tapeouts. The company reports strong design activity at 28 particularly its first integrated ARM product, the Zynq 7000 product [...] We believe both XLNX and ALTR will outperform the semiconductor market as PLDs continue to take share in infrastructure and fragmented niche markets from ASIC and ASSP vendors who can no longer afford development cost at advanced nodes.” Richard raised his 2013 estimate to $2.27 billion from a prior $2.21 billion, and raised his EPS estimate to $1.85 from $1.70.
Christopher Danely, J.P. Morgan: Reiterates an Overweight rating and raises his price target to $40 from $37. The upside in the quarter and the outlook was “a combination of inventory replenishment and stabilizing demand,” writes Danely. “We remain Overweight Xilinx as the reasons we are positive continue to drive upside � secularly increasing margins and share gains.” Danely raised his 2013 estimate to $2.22 billion and $1.92 per share in profit, up from his prior estimate of $2.17 billion and $1.73.
Bearish!
Tristan Gerra, R.W.Baird: Reiterates a Neutral rating while raising his price target to $35 from $27. The rebound people are thinking of is “mostly optical,” he writes, meaning, a surface appearance. “In our view, absent real signs of a broad market recovery (notably, wireline remains weak), still-cautious views from management on the sustainability of the recovery, and peaking gross margin.” Gerra raised his 2013 estimate to $2.26 billion in revenue and $1.85 in EPS from a prior $2.11 billion and $1.60.
Uche Orji, UBS Securities: Reiterates a Neutral rating, but raises his price target to $37 from $32. The chip cycle is indeed hitting bottom, primed for a turnaround, he writes. “Inventory destocking has largely ended, leading to a return of more typical ordering patterns and a solid +2-6% q/q sales guide, well ahead of our expected flat sales.” However, “We believe near-term headwinds from share losses at 40nm, the primary new product cycle driving FPGA growth in C2012, could limit upside to the stock.” Orji raised his estimate for next fiscal year to $2.46 billion in revenue and $2.22 in EPS.
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