Xilinx (XLNX) Hits a New 52-Week High on Solid Momentum

Shares of Xilinx Inc. XLNX attained a new 52-week high of $49.88 yesterday, eventually closing at $49.69. The company gained 10.2% share price following the better-than-expected second-quarter fiscal 2016 bottom-line results reported on Oct 14.

The California-based chipmaker reported earnings of 48 cents per share which surpassed the Zacks Consensus Estimate of 46 cents. Notably, Xilinx delivered positive earnings surprises in the preceding four quarters with an average beat of 6.86%. Moreover, the company issued encouraging outlook for the third quarter.

The company has been witnessing growth at its 28-nm products which, it believes, will remain a key growth driver over the long run. The company now has a broad array of 28-nm PLD chips including products like Virtex-7, Kintex-7, Artix-7 and Zynq-7000.

It should be noted that Xilinx garnered more than $580 million in revenues from the 28-nm products in fiscal 2015 as against $380 million in fiscal 2014. Additionally, the company expects the figure to increase through fiscal 2016 backed by steady demand and communications, and continued strong adoption in Automotive, ISM, Test and Aerospace and Defense markets.

Moreover, design wins from other sectors such as wired communication, data center and industrial will add to the revenues. While the scramble for shares at advanced nodes continues, strength at the legacy nodes offers near-term support to the business.

Further, we believe that the company's continued focus on margin expansion, cost reduction across its product portfolio and higher yield are the positives. We also believe that Xilinx's product launches will boost revenues.

Additionally, we are encouraged by Xilinx's endeavor to return shareholder value through regular share buybacks and dividend payouts. During the last reported quarter, the company repurchased $100 million shares and paid dividends of approximately $80 million. These initiatives not only boost earnings but also instill investor confidence and loyalty.

Nonetheless, delay in China LTE deployments and higher spending on research and development, and selling, general and administrative segments could impact the company's near-term results. Also, stiff competition from Altera Corp. ALTR is a headwind.

Currently, Xilinx carries a Zacks Rank #3 (Hold).

Stocks to Consider

Some better-ranked stocks in the broader technology industry are CEVA Inc. CEVA and Mellanox Technologies Ltd. MLNX. Both the stocks sport a Zacks Rank #1 (Strong Buy).

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