Expectations, Not Competition, Remain Inphi's Biggest Near-Term Threat

I've had my issues with Inphi's (IPHI) valuation, as you have to stretch and look at what the market has historically been willing to pay for exceptional growth to drive an estimate of fair value, but I've had no issue with the performance of the company. In a quarter where even many tech companies saw significant revenue declines, Inphi more than doubled revenue on the back of strong demand in data centers and telecom, and demand for leading-edge data center solutions doesn't seem to be flagging.

It's possible to argue that Inphi shares are worth more than $130 on the basis of what the market has historically paid for similar growth stories, and some sell-side analysts are arguing the shares are worth more than $160 based upon what the market is currently willing to pay for stocks like AMD (AMD) and NVIDIA (NVDA). I don't really like valuing stocks this way, but it's hard to argue that Inphi isn't in a rare company where growth is concerned and that the opportunities in both telecom and data center remain very attractive.

 

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Expectations, Not Competition, Remain Inphi's Biggest Near-Term Threat