Xilinx Hosts Investor Day: Two Sell-Side Takes

Xilinx, Inc. XLNX hosted an analyst and investor day presentation Tuesday where management laid out its business and discussed growth drivers.

The Analysts

BMO Capital Markets' Ambrish Srivastava maintained a Market Perform rating on Xilinx with a price target lowered from $125 to $115.

KeyBanc Capital Markets' John Vinh maintained an Overweight rating with an unchanged $145 price target.

BMO: 'Crispest Presentation' 

Xilinx hosted "one of the crispest" analyst day presentations ever as management "clearly laid out" the multiple drivers of growth for the business, Srivastava said in a Wednesday note. 

The company's areas of focus include the following, the analyst said:

• Prioritizing data center.
• Accelerating growth in core markets.
• Driving adaptive computing.

Other areas of focus include a shift toward a platform-based approach after platform-based products grew at a 70-percent compounded annual growth rate vs. a 30-percent CAGR for advanced products, Srivastava said. 

As expected, Xilinx projects its revenue will grow 15 percent in fiscal 2020, with operating expenditures rising 18 percent and remaining elevated through fiscal 2021, he said. 

BMO's model predicts 13-percent revenue growth and 15-percent operating expenditure growth. 

While Xilinx deserves credit for showing impressive top-line growth in fiscal 2019, a mid-teens long-term revenue CAGR growth profile will be a "tough bar to meet consistently," the analyst said. 

Xilinx's "strong execution mode" should continue moving forward, but that by itself isn't reason enough to believe the stock will outperform, according to BMO. 

Related Link: Goldman No Longer A Xilinx Bull Despite Unchanged Positive Outlook

KeyBanc: Positives And Negatives

Xilinx's presentation included a mix of two positive readouts and two negatives, Vinh said in a Tuesday note.

On the positive front, the company expects the upcoming 5G cycle to be three to four times greater than 4G, as 50 percent more base stations are needed and greater field-programmable gate array content is needed compared to 4G, the analyst said. 

The second positive: Xilinx disclosed that DCG revenue rose 46 percent in fiscal 2019 to $232 million and is expected to accelerate to 60 percent growth in fiscal 2020, Vinh said. 

The two negative read-outs were as follows, the analyst said: 

• In 2020, the wireless group segment is expected to grow at a 10-15-percent rate, reflecting "meaningful impact" from ASIC displacement, mostly from Huawei.
• Xilinx's operating expenditure outlook was higher than expected and will result in a 160-basis point decline in operating margins.

Price Action

Xilinx shares were higher by 1.45 percent at $114.45 at the close Wednesday. 

Related Link: BMO's Semiconductor Pair Trade: Buy ON, Step To The Sidelines On Xilinx

Photo courtesy of Xilinx.