UPDATE: FBR Capital Markets Initiates Coverage on Xilinx with Outperform Rating, $65 PT on Multiple Positive Factors

In a report published Thursday, FBR Capital Markets analyst Christopher Rolland initiated coverage on

with an Outperform rating and $65.00 price target. In the report, FBR Capital Markets noted, “Programmable logic devices (PLDs) represent one of the most favorable subsegments of the semiconductor industry today given: (1) the economies of scale favoring incumbents with expensive and extensive software and IP libraries; (2) concentrated market share and a virtual duopoly (86% combined market share), helping to alleviate margin pressures common in other segments of the semiconductor industry; (3) a ‘sufficiently epic' business task incorporating both Moore's Law and a fast innovation treadmill that helps to successively maintain generational pricing; and (4) growth near the rate of the overall semiconductor industry, with opportunities to augment that rate through ASIC or ASSP replacement. We also believe in the general thesis of the ‘programmable imperative,' a theory that highlights the growing comparative value proposition of FPGAs versus ASICs over time, as the up-front development costs of the latter are growing exponentially and unsustainably. That said, while beneficial, we believe this value proposition is likely to arrive later and will ultimately be less impactful than the heightened rhetoric that both in the duopoly suggest.” Xilinx closed on Wednesday at $54.55.