JPMorgan Upgrades Mellanox To Overweight, Sees 27% Upside

JPMorgan's Harlan Sur upgraded the rating on Mellanox Technologies, Ltd. MLNX to Overweight, with a price target of $67.

The company completed the acquisition of EZChip on February 23, for an implied transaction value of $811 million. With this acquisition, Sur believes that Mellanox would be able to add further intelligence capabilities to its data center offerings.

Mellanox would also be able to expand its market opportunity into service provider networks, combining EZchip's Layer 3-7 data center/carrier network processing solutions to its own Layer 1-3 connectivity solutions.

"The addition of EZchip's network/multicore processor portfolio will allow for increased product functionalities including security, deep packet inspection, video, network, and storage processing," Sur mentioned, adding that this would help strengthen Mellanox's already robust position in the segment.

"As a result of addressable new markets and customers for the combined product lines, Mellanox's combined 2017 TAM is expected to increase by $2.2B to $14.5B," according to the J.P. Morgan report.