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Major Keys From Xilinx's Analyst Day

May 23, 2017 11:55 am
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Ambrish Srivastava of BMO Capital Markets maintains an Outperform rating on Xilinx, Inc. (NASDAQ:XLNX) with a price target boosted from $66 to $71 after attending the company’s Analyst Day presentation.

According to Srivastava, Xilinx’s event on Monday focused on the company’s commitment to expand its multi-node lead over rival Altera/Intel Corporation (NASDAQ:INTC). For instance, Xilinx previously estimated a one-year lead in its 16nm node, but now this lead appears to be over 18-months ahead of the competition.

“We believe Xilinx is currently in a position that is pretty unparalleled in the history of the industry — i.e., a multi-node, or a multi-generation lead over its rival Altera,” the analyst noted.

Big Win With More To Come

Xilinx is confident a contract with AWS could be potentially transformative for that segment in terms of opening up the machine-learning market. In fact, the analyst expects to see more contract wins with additional large hyperscale companies in the future.

Srivastava added that Xilinx expects to see an incremental $750 million in revenue by 2021 through expanding its markets and gaining a bigger market share in existing markets.

Finally, there were some concerning aspects of the company’s presentation. Management’s operating expenditure guidance implies an operating margin of 29.0 percent, which is short of the 29.6 percent the analyst was expecting. Nevertheless, the company does expect to return to a 30-percent rate after fiscal 2018, although Tuesday’s notable sell-off may indicate some investor frustration with the guidance.

At time of publication, shares of Xilinx were down 6.25 percent at $63.30.

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