When I last wrote about MaxLinear (MXL), I mentioned
the company was in the middle of a transition in its business mix and
that this process was likely to lead to above-average volatility in the
company’s financial performance. Since then, the company has continued
to see not only erosion in legacy businesses but also
greater-than-expected weakness in its communications (Infrastructure)
market. That has led to meaningful revisions to expectations (around 10%
on the top line) and noticeable underperformance versus the SOX over
the past six months or so.
The basic story with
MaxLinear hasn’t really changed, though. There is still above-GDP growth
potential in the core “Connected Home” business, with near-term drivers
like the DOCSIS 3.1 product cycle, but the real growth opportunity lies
in wireless backhaul, access, and optical interconnects. MaxLinear’s
performance should start to improve in the second half of 2018, with a
period of double-digit revenue growth and improving margins following.
With a fair value still in the mid-to-high $20s, MaxLinear looks like a
worthwhile prospect to consider for those who can stomach the near-term
volatility.
Read more here:
MaxLinear Testing Investors' Patience
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