Susquehanna Upgrades Mellanox Technologies Ahead Of Chinese Decision On Nvidia Deal

The blockbuster acquisition of Israeli networking company Mellanox Technologies, Ltd. MLNX for $6.8 billion by U.S. chipmaker Nvidia Corp NVDA has already gained approval by the European Union.

Although there is low visibility into China’s regulatory approval process, the three most likely outcomes seem to be positive for Mellanox shareholders, Susquehanna said in a Tuesday upgrade.

The Mellanox Analyst

Christopher Rolland upgraded Mellanox Technologies from Neutral to Positive and raised the price target from $125 to $145.

The Mellanox Thesis

If the deal receives regulatory approval before June 10, this will mean a takeout price of $125 per share, representing a gross return of over 3.1% and annualized return of more than 9.5%, Rolland said in the upgrade note. (See his track record here.)

In the event that China does not grant regulatory approval by June 10 and Mellanox decides to cancel the deal, the market could value its stock as high as $160 per share in time, and this translates to return of around 32%, he said.

The third possible outcome is Mellanox asking Nvidia for a “sweetener” to extend the deal deadline while the two companies wait for Chinese regulatory approval, Rolland said. The “sweetener” could take the price to $145 per share, he said.

Mellanox Price Action

The stock was trading 0.18% higher at $121.39 at the time of publication Tuesday.

Related Links:

Benzinga's Top Upgrades, Downgrades For February 18, 2020

Nvidia Analysts Maintain Bullish Outlook Following Q4 Data Center, Gaming Strength

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