Why Mellanox Shares Skyrocketed

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Israeli chipmaker Mellanox Technologies (Nasdaq: MLNX  ) soared a staggering 41% on Thursday after its quarterly results and outlook easily topped Wall Street estimates.

So what: Mellanox shares have slumped in recent weeks on worries over slowing growth, but a massive first-quarter beat -- EPS of $0.99 versus the consensus of $0.74 -- coupled with a strong third-quarter outlook is quickly easing those concerns. In fact, particularly strong storage, data, and cloud-computing tailwinds pushed revenue over $100 million for the very first time, prompting at least 10 Wall Street analysts to raise their price targets on the stock.

Now what: For the third quarter, management now expects revenue of $150 million-$155 million, versus the average analyst estimate of just $105 million. "We believe this growth demonstrates the broader market acceptance of both our FDR 56Gb/s InfiniBand and 10 and 40 Gigabit Ethernet solutions," Chairman and CEO Eyal Waldman said. "More customers realize that 'fast interconnect' provides them with a higher return-on-investment and lower total cost of ownership." Of course, with the stock soaring to an all-time high today and up a whopping 220% over the past year, I'd wait for a much larger margin of safety before buying into that bullishness.  

Interested in more info on Mellanox? Add it to your watchlist.

Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Try any of our Foolish newsletter services free for 30 days.

We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy always gets a perfect score.

Read/Post Comments (0) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1950240, ~/Articles/ArticleHandler.aspx, 10/26/2016 9:15:37 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 18,199.33 30.06 0.17%
S&P 500 2,139.43 -3.73 -0.17%
NASD 5,250.27 -33.13 -0.63%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/26/2016 4:00 PM
MLNX $43.20 Up +0.10 +0.23%
Mellanox Technolog… CAPS Rating: **