Market Overview

Analyst: Activist Investor Starboard's Involvement Makes Mellanox 'Shareholder-Friendly'

Share:
Analyst: Activist Investor Starboard's Involvement Makes Mellanox 'Shareholder-Friendly'
Related MLNX
58 Biggest Movers From Yesterday
44 Stocks Moving In Thursday's Mid-Day Session

Israel-based computer networking products supplier Mellanox Technologies, Ltd. (NASDAQ: MLNX) has strong growth prospects in Ethernet, a Loop Capital Markets analyst said.

The Analyst

Loop Capital Markets analyst James Kisner initiated coverage of Mellanox with a Buy rating and $84 price target.

The Thesis

Mellanox is likely to benefit from the adoption of its high-speed Ethernet network interface cards and switches by hyperscale internet and web 2.0 companies, Kisner said in a Monday note. The Ethernet business now accounts for about 50 percent of the company's revenues, the analyst said. 

Mellanox expects its Ethernet NICs to grow faster than 25 percent in calendar year 2018, Kisner said. The analyst also sees Ethernet switching as a particularly attractive opportunity. Kisner expects the company's spectrum Ethernet switch to grow from an estimated $54 million in 2017 to $110 million in 2018.

That said, the growth prospects for the company's Infiniband business are somewhat muted given the competitive environment, especially with Intel Corporation (NASDAQ: INTC)'s focus on the high-performance interconnect business and the launch of its Omni-Path interconnect, Kisner said. 

"We expect ongoing Omni-Path adoption will remain a headwind for Mellanox's IB business over 2018," the analyst said.

The involvement of activist investment firm Starboard Value, which picked up a 9.8-percent-stake in the company, is a positive catalyst, according to Loop Capital Markets. 

"It seems to us that Starboard's involvement is already helping Mellanox be more shareholder-friendly, and we believe it's possible Starboard's involvement could also result in a sale of the company," Kisner said. 

The Price Action

Mellanox shares are up about 36 percent over the past year, with much of the gain coming in late 2017.

Related Links:

Mellanox Technologies Earnings Preview

Why Broadcom Is A Favorite At Bernstein, With Or Without Qualcomm

Photo courtesy of Mellanox. 

Latest Ratings for MLNX

DateFirmActionFromTo
Dec 2018JefferiesMaintainsBuyBuy
Oct 2018JP MorganUpgradesNeutralOverweight
Oct 2018Bank of AmericaInitiates Coverage OnBuy

View More Analyst Ratings for MLNX
View the Latest Analyst Ratings

Posted-In: Ethernet James Kisner Loop Capital Markets NetworkingAnalyst Color Price Target Initiation Analyst Ratings Best of Benzinga

 

Related Articles (INTC + MLNX)

View Comments and Join the Discussion!

Latest Ratings

StockFirmActionPT
MDRXKeyBancUpgrades0.0
ANETNomuraUpgrades260.0
CNPRBC CapitalUpgrades34.0
FISVOppenheimerUpgrades88.0
FNDUBSUpgrades37.0
View the Latest Analytics Ratings
Don't Miss Out!
Join Our Newsletter
Subscribe to:
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Fintech Focus
Your weekly roundup of hot topics in the exciting world of fintech.
Thank You
for registering for Benzinga’s newsletters and alerts.
• The Daily Analysts Ratings email will be received daily between 7am and 10am.
• The Market in 5 Minutes email will be received daily between 7am and 8am.
• The Fintech Focus email will be received every Friday between 2pm and 5pm.

Packaging Of America's Earnings Preview

Earnings Preview: Knight Transportation