Not everyone believes that Mellanox Technologies Ltd. (Nasdaq:MLNX; TASE:MLNX), under chairman, president and CEO Eyal Waldman, will continue its strong performance over time. JPMorgan analyst Harlan Sur admits, "We missed the call on the stock", but reiterates his "Neutral" recommendation for the share and raised his target price to $80.
Mellanox's share price rose over 40% on Nasdaq and the TASE on Thursday, following the publication of its financial report for the second quarter, but fell 5% in profit taking on Nasdaq to $89.24, and fell 3.4% on the TASE today to NIS 361.
Sur says that there is a limited upside from where Mellanox's share is at.
Credit Suisse also reiterated its "Neutral" recommendation and share price for Mellanox.
Most of Mellanox's revenue growth comes from its products - high-speed InfiniBand technology cards and switches which offer 56 Gbps connectivity speed between computers, far faster than legacy products. This is also the reason for the company's profit growth for the second quarter. Waldman constantly stresses that the company is one generation ahead of its competitors, and as long as it deliveries leading-edge products, the company's performance will improve.
One possible reason for the analysts' surprise is that they treat Mellanox as a chip company, when 47% of its second quarter revenue came from chips and cards, and the rest from software and communications equipment. The company's growth is driven by industry trends, such as cloud computing, large-scale data storage, and real-time data analysis, which has little impact on the semiconductor market, compared with companies that provide connectivity and storage systems that operate in the same space.
Published by Globes [online], Israel business news - www.globes-online.com - on July 22, 2012
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