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Bull of the Day: Xilinx (XLNX)

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Based in San Jose, CA, Xilinx, Inc. (XLNX - Free Report) is a semiconductor company that designs and develops programmable devices and associated technologies for cloud and wireless communications applications. Xilinx is known for inventing the field-programmable gate array (FPGA) device, and it also created the first fabless manufacturing model.

XLNX Rallies on Q3 Earnings Beat

Xilinx reported third-quarter results that beat analyst expectations and shares popped 18% as a result.

Earnings of 92 cents came in well above the Zacks Consensus Estimate of 85 cents per share.

Revenues surged 34% year-over-year to $800 million, also beating our consensus estimate thanks to strength across the company’s Wireless Communications, Aerospace and Defense, and Test and Emulation markets.

In particular, Xilinx’s Wireless segment is benefitting from early 5G production, pre-5G deployments and LTE upgrades.

Advanced product revenues jumped 51% year-over-year, contributing 66% to total revenues.

Xilinx also saw year-over-year growth across all four regions: North America and Europe grew 24% each while Asia Pacific and Japan grew 47% and 26%, respectively.

President and CEO Victor Peng said in the earnings release that “Based on the guidance we are providing for the fiscal fourth quarter, we expect to exceed $3 billion in annual revenues for the first time in our history…We continue to execute to our strategy and drive growth across our portfolio.”

Price Performance & Rising Estimates

Xilinx, Inc. Price and Consensus

Xilinx, Inc. Price and Consensus | Xilinx, Inc. Quote

Over the past six months, XLNX has gained over 55%, and the stock has bounced back nicely from the market pullback seen at the end of last year.

Estimates have been rising lately too, pushing the stock towards a Zacks Rank #1 (Strong Buy).

For the current fiscal year, Xilinx’s earnings are expected to grow over 23% year-over-year. Nine analysts have upped their estimate, and the Zacks Consensus Estimate has moved twenty cents higher in the past 60 days from $3.29 to $3.49 per share.

Next year looks pretty strong too. The consensus estimate sits at $3.77 per share, with nine upward revisions in the last two months as well.

Bottom Line

For Q4, Xilinx expects to generate $815-$835 million in revenues, representing 21%-24% annual growth and 2%-4% sequential growth.The company didn’t provide any earnings guidance, but analysts expects EPS to rise 31% annually for the fourth quarter.

Xilinx has a well-diversified business model, something that makes it a safer chip play compared to others with a more concentrated focus. Despite declining margins, the company is delivering double-digit growth when many of its peers are currently expected to see negative growth.

For those investors looking for a chip stock to add to their portfolio, XLNX should definitely be on the shortlist.

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