MaxLinear Logging Some Important Wins, But End-Market Conditions Remain Difficult

MaxLinear (MXL) shares were looking a little pricey back in May, but just as the market was starting to warm up to the company’s opportunities in wireless backhaul, 5G transceivers, and PAM4, the company had to deal with the U.S. government’s crackdown on Huawei, as well as even greater weakness in the Connected Home business and worse-than-expected trends in high-performance analog.

With all of that, the shares are down about 20% since my last article and analysts have significantly curtailed their revenue and margin expectations for 2019 and 2020. While I agree that the near-term outlook is tough, particularly with potential delays in PAM4 revenue, MaxLinear is a surprisingly profitable company (on a non-GAAP basis) relative to its revenue base and I think that will translate into impressive leverage when the revenue materializes (which I expect to happen in 2021). This is more of a ”story stock” than a fundamentals-driven call, but this is a somewhat beaten-down name that may still be worth watching.

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MaxLinear Logging Some Important Wins, But End-Market Conditions Remain Difficult