A comprehensive review of Mellanox Technologies Ltd. (Nasdaq:MLNX; TASE:MLNX) by UBS puts the spotlight on the market's feeling about possible competition with Intel. UBS rates Mellanox "Neutral", with a price target of $70, close to the company's market cap of $2.86 billion, after a 45% drop from September's peak.
UBS sets a price target substantially lower than most other analysts, and the reason for that, the bank explains, is the competition with Intel on the horizon. Mellanox, which provides solutions for high-speed connectivity on enterprise networks, will find itself competing head-on with Intel by the second half of 2014, with support for 100 Gb per second, which will force it to advance faster to the next generation.
UBS sketches two possible scenarios: if Intel's plan is technologically successful, then Mellanox's share price will fall a further 35%; on the other hand, if Intel fails, Mellanox could jump by 80%.
UBS comes to the conclusion that if Intel does succeed, Mellanox is likely to be acquired. Among the possible buyers that the analysts mention are two particularly creative names: AMD and Nvidia.
Most analysts covering Mellanox have given it an "Overweight" recommendation in recent quarters, on the assumption that the company was on a growth track.
UBS now joins some other banks, among them Credit Suisse and JP Morgan, whose analysis of the jump in Mellanox's performance in the past few quarters is less optimistic than that of the rest.
Published by Globes [online], Israel business news - www.globes-online.com - on December 6, 2012
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