Washed Out Expectations Should Help MaxLinear From Here

It tells you something about the level of confidence the market had in a company when it announces that the next quarter’s revenue will be 20% lower than expected (and 25% lower relative to expectations just a month or so before) and the stock basically shakes it off in a few hours. Such was the case with MaxLinear (MXL), a recent serial disappointer in the semiconductor space that has repeatedly lowered expectations in recent quarters, but where there’s still some measure of confidence that 2019 and 2020 will see a significant ramp in new advanced products.

As I’ve written in the past on MaxLinear, I expected 2018 to be a forgettable year (although not this bad), and I still see opportunities for the company to pick up business in MoCA, wireless backhaul, and DOCSIS 3.1 in 2019 and 2020, with hyperscale data center interconnects also chipping in late in 2019 and into 2020. I believe MaxLinear shares can support a low $20s fair value today, but a lot of management credibility is resting on this third quarter being the worst point of the cycle and revenue ramping up from there.

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Washed Out Expectations Should Help MaxLinear From Here