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What Will You Miss Out On by Overlooking Mellanox Stock?
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Mellanox has exhibited impressive price performance over the last two years. The stock, which was valued at $40.65 at the beginning of 2016, currently trades close to $92, reflecting more than two-fold jump.
Notably, the company has gained approximately 40% since it reported third-quarter fiscal 2018 results on Oct 24. Year to date, shares of Mellanox have returned 42.7% against the industry’s decline of 1.2%. Meanwhile, the S&P 500 witnessed a rise of 1%.
The company’s strength in Ethernet-based portfolio and expanding customer base favor investor’s optimism in the stock.
We note that Mellanox recorded average positive earnings surprise of 16.3% in the trailing four quarters.
Let’s delve deeper and analyze the factors driving Mellanox’s robust performance.
Robust Adoption of Ethernet Devices: A Key Catalyst
Mellanox is one of the major suppliers of 25, 50, and 100GB Ethernet adapters, switches, and cables to the market today. In fact, per Crehan research estimates, Mellanox had a market share of 69% in the high-speed Ethernet adapter business in second-quarter 2018, leaving peers like Intel (INTC - Free Report) , Broadcom (AVGO - Free Report) , Cisco and others trailing.
In fact, the company recently announced that its Ethernet adapters have been deployed in production network of Alibaba's (BABA - Free Report) Infrastructure Services. Further, on Oct 25, 2018, Mellanox announced that it has achieved a milestone of shipping greater than 2.1 million units of Ethernet adapters for nine months ended Sep 30, 2018.
In the third quarter of 2018, the company’s Ethernet business grew 59% year over year driven by robust adoption of company’s high-speed Ethernet network adapters and LinkX transceivers and cables.
Robust innovations in Mellanox’s Ethernet adapters, switches and cables bolster adoption, which in turn is driving the top line.
Collaborations Bode Well
Mellanox has collaborated with Microsoft’s Azure to develop a simple and cost-effective solution via the company’s Spectrum switches and adapters. The solution extends cloud connectivity for on-premise data centers to Microsoft Azure.
Further, the company’s previous collaborations with the likes of NEC Corporation, Atos, VMware, Hewlett Packard Enterprise and Microsemi Corporation have aided it in expanding footprint in the cloud computing and datacenter market.
Encouraging Estimate Revisions
Over the last 60 days, fiscal 2019 estimates were revised, driving the Zacks Consensus Estimate up 5.5% to $5.99 per share. The figure reflects year-over-year growth of 23.1%.
Further, the company has a long-term expected EPS growth rate of 19%.
To Conclude
Mellanox is benefiting from solid demand of its Gigabit EDR solutions in machine learning, artificial intelligence, high-performance computing, database and storage.
Further, robust demand for Mellanox’s InfiniBand solutions is a key catalyst. The company has also won several contracts from the likes of NetApp, the University of Toronto and NASA Ames Research Center, which further reflects sturdy demand for its solutions.
We believe the company’s enhancements its product portfolio with robust capabilities; inorganic additions and expanding customer base favor company’s growth prospects.
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
Image: Bigstock
What Will You Miss Out On by Overlooking Mellanox Stock?
Mellanox has exhibited impressive price performance over the last two years. The stock, which was valued at $40.65 at the beginning of 2016, currently trades close to $92, reflecting more than two-fold jump.
Notably, the company has gained approximately 40% since it reported third-quarter fiscal 2018 results on Oct 24. Year to date, shares of Mellanox have returned 42.7% against the industry’s decline of 1.2%. Meanwhile, the S&P 500 witnessed a rise of 1%.
The company’s strength in Ethernet-based portfolio and expanding customer base favor investor’s optimism in the stock.
We note that Mellanox recorded average positive earnings surprise of 16.3% in the trailing four quarters.
Let’s delve deeper and analyze the factors driving Mellanox’s robust performance.
Robust Adoption of Ethernet Devices: A Key Catalyst
Mellanox is one of the major suppliers of 25, 50, and 100GB Ethernet adapters, switches, and cables to the market today. In fact, per Crehan research estimates, Mellanox had a market share of 69% in the high-speed Ethernet adapter business in second-quarter 2018, leaving peers like Intel (INTC - Free Report) , Broadcom (AVGO - Free Report) , Cisco and others trailing.
In fact, the company recently announced that its Ethernet adapters have been deployed in production network of Alibaba's (BABA - Free Report) Infrastructure Services. Further, on Oct 25, 2018, Mellanox announced that it has achieved a milestone of shipping greater than 2.1 million units of Ethernet adapters for nine months ended Sep 30, 2018.
In the third quarter of 2018, the company’s Ethernet business grew 59% year over year driven by robust adoption of company’s high-speed Ethernet network adapters and LinkX transceivers and cables.
Robust innovations in Mellanox’s Ethernet adapters, switches and cables bolster adoption, which in turn is driving the top line.
Collaborations Bode Well
Mellanox has collaborated with Microsoft’s Azure to develop a simple and cost-effective solution via the company’s Spectrum switches and adapters. The solution extends cloud connectivity for on-premise data centers to Microsoft Azure.
Further, the company’s previous collaborations with the likes of NEC Corporation, Atos, VMware, Hewlett Packard Enterprise and Microsemi Corporation have aided it in expanding footprint in the cloud computing and datacenter market.
Encouraging Estimate Revisions
Over the last 60 days, fiscal 2019 estimates were revised, driving the Zacks Consensus Estimate up 5.5% to $5.99 per share. The figure reflects year-over-year growth of 23.1%.
Further, the company has a long-term expected EPS growth rate of 19%.
To Conclude
Mellanox is benefiting from solid demand of its Gigabit EDR solutions in machine learning, artificial intelligence, high-performance computing, database and storage.
Further, robust demand for Mellanox’s InfiniBand solutions is a key catalyst. The company has also won several contracts from the likes of NetApp, the University of Toronto and NASA Ames Research Center, which further reflects sturdy demand for its solutions.
We believe the company’s enhancements its product portfolio with robust capabilities; inorganic additions and expanding customer base favor company’s growth prospects.
Zacks Rank
Mellanox carries a Zacks Rank #2 (Buy).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
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