Maxim Integrated Looking Ahead To Improving Growth Prospects

Having moved aggressively to prune channel inventory, Maxim Integrated (MXIM) looks better-placed than many of its peers to return to growth as the semiconductor cycle bottoms out. I also think it’s very relevant that Maxim’s margins bottom out at levels (mid-60%’s for gross margin, around 30% for operating margin) that many semiconductor managements would love to have in their best quarters. Last and not least, Maxim has some attractive company-specific drivers in areas like autos (ADAS and EVs) and industrial (automation) that should propel above-market growth.

Valuation remains a sticking point for me, particularly as Maxim’s management has what seems to be bullish expectations for demand in 2020. I’m not as excited about analog at this point in the cycle (given valuations, mostly), and I like names with better leverage to data center and 5G, though Maxim’s content growth potential in autos is not trivial. I believe Maxim’s quality merits some premium, but I think there are better options today.

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Maxim Integrated Looking Ahead To Improving Growth Prospects