Pacific Crest Is A Buyer Of Xilinx, Says Co. Gaining Share From Altera

Pacific Crest reiterated its Overweight rating on Xilinx, Inc. (NASDAQ: XLNX) after the company's analyst event strengthened its bullish stance on the stock. The brokerage also noted that Xilinx is taking share from Altera, which was bought by Intel Corporation (NASDAQ: INTC) last year.

Altera

Analyst John Vinh said early signs suggest that Xilinx has "already won out" at 20 nm and 16 nm, given significant delays at Altera.

"[F]ollowing Altera's acquisition by Intel, it is clear Altera has already lost at 20 nm and 14 nm, which is consistent with our Overweight thesis. We are buyers of XLNX," Vinh wrote in a note.

Although Altera has finally started shipping 20 nm, the analyst noted that it is two years late. Also, Altera is a year behind Xilinx in ramping up 14 nm products.

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In addition, Vinh said Xilinx has already signed over 20 MOUs with strategic customers over the past six months, as customers become increasingly wary of Intel's long-term commitment to supporting Altera.

Looking Ahead

At the analyst event, Xilinx said it sees over $750 million in incremental revenue over the next five years (6 percent CAGR), driven by market expansion and share gains. Xilinx is poised to benefit from four megatrends: cloud computing, embedded vision, industrial IoT and 5G.

"Of the $750 million, $500 million is expected to be from market expansion, while $250 million should be from PLD share gains. This would imply ~$3.25 in EPS, which at 20x suggests fair value of $65," Vinh highlighted.

Vinh said the company noted that data center acceleration opportunity is expected to drive several hundreds of millions by 2020, with meaningful hyperscale deployments expected in about 12 months.

Vinh, who has a price target of $55 on Xilinx, expects full-year EPS/revenue of $2.14/$2.346 billion versus consensus estimate of $2.16/$2.335 billion.

At the time of writing, shares of Xilinx gained 0.50 percent to $45.11.