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
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.
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