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Xilinx (XLNX) Continues to Outperform: Should You Invest?
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Finding the best performing stocks that are worth adding to your portfolio can be a challenging task. The factors that investors consider while creating a lucrative portfolio include share price and a continued uptrend in estimates.
At the moment Xilinx Inc. is well poised to be added to one's portfolio. Over the last six months, Xilinx has increased 33.2% compared with the Zacks categorized Electronic-Semiconductors industry that has increased just 30.6%. The stock’s long-term earnings per share growth rate is 8.25%.
Also, the shares of Xilinx touched a new 52-week high of $61.07 on Dec 27, eventually closing at $61.24. Further, estimates for this Zacks Rank #2 (Buy) stock have witnessed an uptrend. In the past 60 days, fiscal 2016 estimates moved north from $2.24 per share to $2.25 per share.
What’s Aiding the Stock?
Although the company reported better-than-expected second-quarter of fiscal 2017 results more than two months back, shares of Xilinx continue to trend higher and are up 23% since then. The top and the bottom line also witnessed impressive year-over-year improvement.
Revenues by end markets (Communications & Data Center, Broadcast, Consumer & Automotive and Industrial, Aerospace & Defense) registered year-over-year growth.
Increasing demand for 28-nm, 20-nm and 16-nm nodes, driven by higher wireless deployments and strength in the wired communication segment, are expected to remain growth drivers. The company’s new product launches should further aid revenues.
Xilinx is set to capitalize on the global trend of PLDs replacing ASICs. There are certain fundamental advantages of using FPGAs over low-cost ASICs. One of the basic reasons is the difficulty in getting suitable ASICs for a design and the additional cost of re-certifying new ASIC-based designs. FPGAs are widely used in third generation (3G) and fourth generation long-term evolution (4G LTE) network connections. We believe Xilinx is well equipped with FPGA product suites (Virtex-7, Kintex-7, Zynq-7000, Virtex-6, Virtex-5, Kintex UltraScale and Spartan-6) to secure a major share of the growing PLD market.
We are also encouraged by Xilinx’s endeavor to return shareholder value through continued share buybacks and dividends. Over the last 10 years, the company has returned approximately 100% of its operating cash flow to its shareholders and has repurchased approximately $2 billion of its common stock since 2010. It should be noted that in May 2016, the company’s board of directors approved a new share repurchase authorization of $1 billion. Furthermore, Xilinx has regularly paid quarterly cash dividends for the past 11 years. The company started paying 5 cents per share as quarterly dividend in fiscal 2004 and has raised the amount every year to reach the present level of 33 cents. This represents a compound annual growth rate of 17%.
Notably, during fiscal 2016, the company returned over $762 million through share buyback and dividend payments. Continuing with its policy of returning cash to shareholders, the company paid $367.6 million as cash dividends and share repurchases during the first half of fiscal 2017. These investor-friendly initiatives not only boost earnings but also instill investors’ confidence and loyalty.
Notably, the company has an average positive earnings surprise of 6.9%. All these factors are likely to aid Xilinx’s long-term results.
Risks Persist
A slowdown in the Chinese economy, along with economic weakness in Europe and the Asia-Pacific could impact the company’s near-term results. Also, competition from the likes of Lattice Semiconductor Corporation (LSCC - Free Report) remains a material headwind.
Micron and Broadcom have a long-term expected earnings per share growth rate of 10% and 13.59%, respectively.
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Xilinx (XLNX) Continues to Outperform: Should You Invest?
Finding the best performing stocks that are worth adding to your portfolio can be a challenging task. The factors that investors consider while creating a lucrative portfolio include share price and a continued uptrend in estimates.
At the moment Xilinx Inc. is well poised to be added to one's portfolio. Over the last six months, Xilinx has increased 33.2% compared with the Zacks categorized Electronic-Semiconductors industry that has increased just 30.6%. The stock’s long-term earnings per share growth rate is 8.25%.
Also, the shares of Xilinx touched a new 52-week high of $61.07 on Dec 27, eventually closing at $61.24. Further, estimates for this Zacks Rank #2 (Buy) stock have witnessed an uptrend. In the past 60 days, fiscal 2016 estimates moved north from $2.24 per share to $2.25 per share.
What’s Aiding the Stock?
Although the company reported better-than-expected second-quarter of fiscal 2017 results more than two months back, shares of Xilinx continue to trend higher and are up 23% since then. The top and the bottom line also witnessed impressive year-over-year improvement.
Revenues by end markets (Communications & Data Center, Broadcast, Consumer & Automotive and Industrial, Aerospace & Defense) registered year-over-year growth.
Increasing demand for 28-nm, 20-nm and 16-nm nodes, driven by higher wireless deployments and strength in the wired communication segment, are expected to remain growth drivers. The company’s new product launches should further aid revenues.
Xilinx is set to capitalize on the global trend of PLDs replacing ASICs. There are certain fundamental advantages of using FPGAs over low-cost ASICs. One of the basic reasons is the difficulty in getting suitable ASICs for a design and the additional cost of re-certifying new ASIC-based designs. FPGAs are widely used in third generation (3G) and fourth generation long-term evolution (4G LTE) network connections. We believe Xilinx is well equipped with FPGA product suites (Virtex-7, Kintex-7, Zynq-7000, Virtex-6, Virtex-5, Kintex UltraScale and Spartan-6) to secure a major share of the growing PLD market.
We are also encouraged by Xilinx’s endeavor to return shareholder value through continued share buybacks and dividends. Over the last 10 years, the company has returned approximately 100% of its operating cash flow to its shareholders and has repurchased approximately $2 billion of its common stock since 2010. It should be noted that in May 2016, the company’s board of directors approved a new share repurchase authorization of $1 billion. Furthermore, Xilinx has regularly paid quarterly cash dividends for the past 11 years. The company started paying 5 cents per share as quarterly dividend in fiscal 2004 and has raised the amount every year to reach the present level of 33 cents. This represents a compound annual growth rate of 17%.
Notably, during fiscal 2016, the company returned over $762 million through share buyback and dividend payments. Continuing with its policy of returning cash to shareholders, the company paid $367.6 million as cash dividends and share repurchases during the first half of fiscal 2017. These investor-friendly initiatives not only boost earnings but also instill investors’ confidence and loyalty.
Notably, the company has an average positive earnings surprise of 6.9%. All these factors are likely to aid Xilinx’s long-term results.
Risks Persist
A slowdown in the Chinese economy, along with economic weakness in Europe and the Asia-Pacific could impact the company’s near-term results. Also, competition from the likes of Lattice Semiconductor Corporation (LSCC - Free Report) remains a material headwind.
Stock to Consider
Better-ranked stocks in the technology sector are Micron Technology, Inc. (MU - Free Report) and Broadcom Limited (AVGO - Free Report) , both sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Micron and Broadcom have a long-term expected earnings per share growth rate of 10% and 13.59%, respectively.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2017?
Who wouldn't? As of early December, the 2016 Top 10 produced 5 double-digit winners including oil and natural gas giant Pioneer Natural Resources which racked up a stellar +50% gain. The new list is painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. Be among the very first to see it>>