Mellanox Technologies, Ltd.
) gained significant momentum after its InfiniBand product won
back-to-back design contracts from IT giants Intel Corp. (
) and Hewlett-Packard Co. (
). This fabless semiconductor company is a Zacks #1 Rank (Strong
Buy) with shares that have jumped nearly 100% year to date.
Mellanox's 1Q Crushed Estimates
Mellanox reported a very strong first quarter of 2012 (reported
April 18) with earnings that soared to 34 cents per share, compared
to 13 cents in the year-ago quarter. The result beat the Zacks
Consensus Estimate by 16 cents (88.9%).
The better-than-expected results were primarily driven by strong
revenue growth and operating margin expansion. Revenues jumped
61.1% on a year over year basis to $88.7 million. Operating margin
expanded to 17.6%, up significantly from 8.8% in the year-ago
The strong growth in revenue was primarily driven by higher demand
for InfiniBand products, particularly FDR (Fourteen Data Rate) and
QDR (Quad Data Rate). InfiniBand contributed 86.0% of the total
revenues during the quarter. Additional revenues from the Voltaire
acquisition also contributed significantly.
Mellanox expects second quarter revenues to increase sequentially
from the first quarter. The company expects higher demand for
InfiniBand products, particularly due to the general availability
of Intel's Romley and Sandy Bridge platforms, which are expected to
add an additional $30 million to second quarter revenue.
Following the strong first quarter results, the Zacks Consensus
Estimates for 2012 and 2013 shot up 63 cents (71.6%) to $1.51 and
57 cents (47.0%) to $1.78, respectively.
Mellanox Deserves a Premium Valuation
Currently, Mellanox is trading at a premium to most of its peers
based on P/E, P/S and PEG. Its strong growth prospects indicate
room for further significant expansion.
Mellanox shares are up 96.7% year to date, compared to a mere 4.1%
increase for the S&P 500. The stock price has almost doubled
due to strong demand for its InfinBand products. The stock is
currently above its 50 and 200 day moving averages of 58.89 and
Mellanox shares have also outperformed its peers such as Intel,
Broadcom, Emulex and Qlogic on a year-to-date basis. However,
trading volumes are considerably lower.
Incorporated in 1999 and headquartered in Sunnyvale, California,
Mellanox is one of the pioneers of the InfiniBand technology. The
company has its engineering facility in Yokneam, Israel. Since
2001, the company has been shipping its flagship InfiniBand
Mellanox has a strong customer base of more than 269 companies that
includes H-P, Intel, Oracle Corp. (
) and IBM (
) to name a few. H-P and IBM were the largest revenue contributors
in fiscal 2011.
MELLANOX TECH (MLNX): Free Stock Analysis
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