Xilinx Still Has Growth Drivers, But The Street Has Gotten More Cautious

When I last wrote on Xilinx (XLNX), I didn’t see a particularly attractive opportunity in the shares, but I also didn’t expect the roughly 50% underperformance relative to the SOX index that was to come. Xilinx has made a credible case for attractive long-term growth opportunities in markets like data centers and from expanded product platform opportunities like Zynq, but the company has also seen a much faster-than-expected erosion of its 5G opportunity from ASIC vendors like Marvell Technology Group (MRVL).

The shares have already enjoyed a good bounce from their March panic lows and do still seem to have some upside relative to discounted cash flow, or at least more than has typically been available. Management needs to rebuild the enthusiasm that investors once had for FPGAs in general, and that is likely to take some time, but won’t be helped by the challenges created by the COVID-19 outbreak. Although I see some opportunity here, there are names I like better on a risk-adjusted basis.

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Xilinx Still Has Growth Drivers, But The Street Has Gotten More Cautious