Developments at MaxLinear (MXL) have been quite interesting since my last update on the company in mid-May. The acquisition of Intel’s (INTC) Home Gateway business has provided a bigger-than-expected boost, helped at least in part by pandemic-driven work-from-home demand in broadband, and the company has both seen an uptick in communications demand and improved its IP portfolio. On the other hand, performance in PAM-4 has largely lived down to my relatively bearish expectations, and there’s still a lot to prove here.
I liked MaxLinear back in May, and the shares have nearly doubled since then, outperforming the SOX by a wide margin. I believe stronger-than-expected residential bandwidth demand has helped, and I likewise believe that acquired gateway business has proven to be a better one that the market originally thought (part of my bullish thesis back in May). At this point, though, I see the shares as more fully-valued; there’s still appreciation potential, but I don’t see the “low-hanging fruit” I saw before, and I think management has more to prove now with areas of the business like PAM-4.
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Work-From-Home Has Boosted MaxLinear, But Execution Is Still A Question Mark
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