Is it time to quit Xilinx stock?

Is it time to quit Xilinx stock?

(NASDAQ: XLNX) is up more than 50% since the start of this year, and at the current price close to $ 149 per share, we believe Xilinx stock has potential downside of around 20%. Why is that? Our belief stems from the fact that Xilinx stock has risen 75% since the end of 2018. Part of that gain has occurred since October 2020, when AMD agreed to an all-equity deal to acquire Xilinx, in which Xilinx investors will receive 1.72 AMD shares for each Xilinx share. AMD expects to complete this deal by the end of 2021. However, in the short term, after posting weak numbers in Q2 2021 and with industrial demand not returning to pre-Covid levels, we believe the Xilinx share could go down. Our dashboard provides the key figures of our thinking, and we explain more to you below. Xilinx manufactures semiconductor devices used in various industries such as aerospace, defense, AI / ML, data center and communications. Xilinx share rise is due to 28% increase in revenue, which, combined with a 1% increase in the number of shares outstanding, resulted in a 27% increase in revenue business per share. However, its P / S multiple fell from 8.6x in 2018 to 8.1x in 2019, but has since grown to 11.9x so far this year, and we believe the stock could see a significant drop, in due to the weak figures for Q2 ’21 and the potential weakness of a recession caused by the Covid epidemic. The global spread of the coronavirus has led to an increase in online activity and data center usage, which is expected to lead to increased demand from the data center, communications and AI / ML industries . However, the decline in demand from other sectors that use Xilinx’s semiconductor products – namely, demand from the automotive, industrial, aerospace and defense sectors, will likely outweigh demand from data centers. This is clear from Xilinx’s Q2 ’21 profit in October, where revenue was $ 767 million, down 8% from $ 833 million in Q2 2020. Additionally, the EPS fell more than 10% from $ 0.90 to $ 0.79, but a closer look reveals the margins actually fell from 24.4% to 26.8% over this period, and the decline in EPS is largely due to higher interest expense and a higher effective tax rate.

Highlights

  • According to Forbes “Is it time to quit Xilinx Stock?”.
  • Why is that? Our belief stems from the fact that Xilinx stock has risen 75% since the end of 2018. Part of that gain has occurred since October 2020, when AMD agreed to an all-equity deal to acquire Xilinx, in which Xilinx investors will receive 1.72 AMD shares for each Xilinx share. AMD expects to complete this deal by the end of 2021. However, in the short term, after posting weak numbers in Q2 2021 and with industrial demand not returning to pre-Covid levels, we believe the Xilinx share could go down. Our dashboard provides the key figures of our thinking, and we explain more to you below.

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