Maxim Integrated's Earnings As Expected, But Market Valuation Seems Too High

Like other chip stocks, Maxim Integrated Products (MXIM) has ridden the “what, me worry?” trend that has driven semiconductors higher this year, even though inventories remain elevated and demand hasn’t recovered as much as hoped (at least not yet). I thought Maxim looked too pricey back in mid-February, and though the shares have lagged the SOX and other analog companies like NXP Semiconductors (NXPI), Analog Devices (ADI), and Microchip Technology (MCHP), I’m not calling that a successful call given that the performance relative to the broader markets has still been pretty good.

I like Maxim’s decision to under-ship relative to apparent demand (reducing channel inventories), and I still like longer-term opportunities in autos, industrial automation, and 100G optical, but I’m also still concerned about the company’s short-term vulnerability to weaker auto and industrial trends, as well as its comparatively lower leverage to 5G and data centers. Maxim pays one of the better dividends among its peers and I have no long-term quality concerns here, but I’m not chasing these shares, particularly when there are some other, more reasonably priced options.

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Maxim Integrated's Earnings As Expected, But Market Valuation Seems Too High