Aug 8, 2013
, we upgraded FPGA (Field Programmable Gate Arrays) chip maker
) to Outperform based on impressive first quarter performance and
solid second quarter guidance. Xilinx carries a Zacks Rank #1
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Why the Upgrade?
Xilinx's first quarter 2014 earnings per share of 59 cents
surpassed the Zacks Consensus Estimate by 19.2%. Revenues dropped
slightly year over year but were much above the Zacks Consensus
Estimate. Over the past four quarters, Xilinx has delivered an
average surprise of 9.6%.
Following the earnings release, the Zacks Consensus Estimate for
2013 went up 11.0% to $2.22 per share. Moreover, the Zacks
Consensus Estimate for 2014 also moved up 8.3% to $2.49 per
Reasons for the Positive Bias on the Company
Xilinx is seeing continuous demand surge for its 28 nanometer
(nm) FPGA chips, which has enabled it to surpass its archrival
). During the first quarter of 2014, sales of these products
exceeded $50.0 million, which was much better than the company's
expectations. It expects sales of 28-nm chips to exceed $60.0
million in the second quarter of 2014.
We also believe that Xilinx is going to benefit from the usage of
more FPGA chips by telecom companies in their 4G and LTE
We are also encouraged by the gross margin expansion despite
difficult revenue comps. We think that the company's continued
focus on margin expansion, cost reduction across its product
portfolio and higher yield would keep it competitively ahead of
Also, we think Xilinx's transition into further lower geometries
(16nm chips in association with foundry partner Taiwan
Semiconductor Manufacturing Ltd.) will prove to be a catalyst.
Other Stocks to Consider
Besides Xilinx, other stocks in the technology sector that are
currently performing well include
). Both these companies carry a Zacks Rank #1 (Strong Buy).