It has been about a month since the last earnings report for Mellanox . Shares have lost about 2.4% in that time frame, outperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Mellanox due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Mellanox Tops Earnings & Revenues Estimates in Q4
Mellanox Technologies, Ltd. reported fourth-quarter 2019 non-GAAP earnings of $2.31 per share, beating the Zacks Consensus Estimate by 40.85%. Further, the bottom line surged 62.7% from the year-ago quarter.
Revenues of $379.8 million improved 30.9% from the year-ago quarter and comfortably outpaced the Zacks Consensus Estimate of $331 million. Robust adoption of Ethernet adapters, switches and LinkX cables drove the top line. Solid momentum in InfiniBand demand was an added positive.
Further, the company reinforced its dominant position in the 25 gigabit per second (Gbps) and above merchant adapter market in the reported quarter.
Apart from this, Mellanox’s Ethernet switch revenues improved 25% sequentially, driven by growing clout of Spectrum switches.
Infiniband revenues improved 19% on a quarter-over-quarter basis.
It is to be noted that on Mar 11, 2019, Mellanox entered into a definitive agreement with NVIDIA, by which the acquirer will buy shares of Mellanox for $125 per share in cash, indicating a total enterprise value of around $6.9 billion.
Operating Results
Non-GAAP gross margin in the fourth quarter of 69.1% expanded 10 basis points (bps) on a year-over-year basis.
Non-GAAP operating expenses in the quarter were up 18.6% year over year and came in at $144.1 million.
Non-GAAP operating income totaled $118.2 million up 50.2% year over year. Non-GAAP operating margin expanded 400 bps on a year-over-year basis to 31.1%.
Balance Sheet & Cash Flow
Mellanox exited the fourth quarter with cash & short-term investments worth $875.9 million compared with $742.5 million in the previous quarter.
In the fourth quarter, the company generated cash of $147.8 million from operations compared with $130 million in the previous quarter.
Guidance
Mellanox refrained from providing first-quarter guidance due to the pending acquisition by NVIDIA.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision. The consensus estimate has shifted 9.38% due to these changes.
VGM Scores
Currently, Mellanox has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. It comes with little surprise Mellanox has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
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Mellanox (MLNX) Down 2.4% Since Last Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for Mellanox . Shares have lost about 2.4% in that time frame, outperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Mellanox due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Mellanox Tops Earnings & Revenues Estimates in Q4
Mellanox Technologies, Ltd. reported fourth-quarter 2019 non-GAAP earnings of $2.31 per share, beating the Zacks Consensus Estimate by 40.85%. Further, the bottom line surged 62.7% from the year-ago quarter.
Revenues of $379.8 million improved 30.9% from the year-ago quarter and comfortably outpaced the Zacks Consensus Estimate of $331 million. Robust adoption of Ethernet adapters, switches and LinkX cables drove the top line. Solid momentum in InfiniBand demand was an added positive.
Further, the company reinforced its dominant position in the 25 gigabit per second (Gbps) and above merchant adapter market in the reported quarter.
Apart from this, Mellanox’s Ethernet switch revenues improved 25% sequentially, driven by growing clout of Spectrum switches.
Infiniband revenues improved 19% on a quarter-over-quarter basis.
It is to be noted that on Mar 11, 2019, Mellanox entered into a definitive agreement with NVIDIA, by which the acquirer will buy shares of Mellanox for $125 per share in cash, indicating a total enterprise value of around $6.9 billion.
Operating Results
Non-GAAP gross margin in the fourth quarter of 69.1% expanded 10 basis points (bps) on a year-over-year basis.
Non-GAAP operating expenses in the quarter were up 18.6% year over year and came in at $144.1 million.
Non-GAAP operating income totaled $118.2 million up 50.2% year over year. Non-GAAP operating margin expanded 400 bps on a year-over-year basis to 31.1%.
Balance Sheet & Cash Flow
Mellanox exited the fourth quarter with cash & short-term investments worth $875.9 million compared with $742.5 million in the previous quarter.
In the fourth quarter, the company generated cash of $147.8 million from operations compared with $130 million in the previous quarter.
Guidance
Mellanox refrained from providing first-quarter guidance due to the pending acquisition by NVIDIA.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision. The consensus estimate has shifted 9.38% due to these changes.
VGM Scores
Currently, Mellanox has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. It comes with little surprise Mellanox has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.