Please ensure Javascript is enabled for purposes of website accessibility

Why MaxLinear Was Up Almost 20% This Week

By Brett Schafer – Oct 29, 2021 at 12:28PM

Key Points

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The integrated-circuit maker impressed investors with its latest quarterly results.

What happened

Shares of MaxLinear (MXL 1.77%) popped 18.1% this week, according to data provided by S&P Global Market Intelligence. The integrated-circuit maker reported its third-quarter earnings results, beating analyst estimates on both revenue and earnings per share.

So what

After the market closed on Oct. 27, MaxLinear released its earnings for the third quarter, which covers the three months ending in September. Net revenue was $229.8 million in the period, up 47% year over year, while non-GAAP (generally accepted accounting principles) earnings per share hit $0.75, up from $0.32 a year ago. Both numbers beat the consensus analyst estimates for the report.

A semiconductor on a board.

Image source: Getty Images.

MaxLinear serves the broadband, connectivity, and infrastructure markets, providing both analog and digital circuits to companies looking to build out different projects. Chipmakers are in hot demand at the moment with the rising need for integrated circuits, which is raising the demand for MaxLinear's products. 

Management expects this demand to continue into the fourth quarter, as well. The guidance calls for $240 million to $250 million in revenue, which is above the estimate of $228.8 million analysts had going into the results. This combination of beating on revenue and earnings, as well as raising fourth-quarter guidance, is likely why MaxLinear stock is up so much this week.

Now what

After the stock popped this week, MaxLinear now has a market cap of approximately $4 billion. With $197.2 million in trailing-12-month free cash flow, the stock has a price-to-free cash flow (P/FCF) ratio of 20. This is actually below the market average, indicating that investors are less confident that MaxLinear's current surge in demand is sustainable.

However, if you believe that the company's current profit levels and cash flow can grow over the coming years, now seems like a good time to buy, even with the stock up so much this week. 

Brett Schafer has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.