Saturday, May 20, 2017

Turbulence Creates Another Opportunity At Mellanox

If you like to trade, Mellanox (NASDAQ:MLNX) may be the stock for you, as there is more than average uncertainty and volatility around these shares as the company looks to benefit from growing adoption of high-speed connectivity products but also faces competitive threats from well-run rivals like Intel (NASDAQ:INTC) and Broadcom (NASDAQ:AVGO).

Although the company has been on an unfortunate run of weaker-than-expected quarters (and weaker guidance), the shares are still up about 15% from the time of my last article (ahead of Intel, weaker than Avago, and in line with the Nasdaq), and expectations have come down significantly. While the competitive threat of Intel still looks manageable, the last few quarters have highlighted that for all of the growth potential in Mellanox's core markets, that growth isn't going to come in predictable clockwork fashion. While I have gotten a little more cautious with my modeling, I still believe these shares are undervalued even with a double-digit discount rate.

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Turbulence Creates Another Opportunity At Mellanox

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