Wells Fargo Begins Xilinx On The Sidelines, Cites Downside To Near-Term Estimates

Although the long-term prospects of Xilinx, Inc. (NASDAQ: XLNX) seem solid, the current Street estimates for another couple of quarters have more downside risk than upside potential, according to Wells Fargo.

The Xilinx Analyst

Aaron Rakers initiated coverage of Xilinx with an Equal-Weight rating and a price target of $95.

The Xilinx Thesis

Xilinx’s shares offer a more attractive entry point in the low-$80 range, Rakers said in the note.

He explained that 5G infrastructure buildouts were still in early stages and could reaccelerate in the back half of 2020. Investors could adopt a wait-and-see approach as the transition from Field Programmable Gate Array (FPGA) to Application Specific Integrated Circuit (ASIC) takes place.

Xilinx is well-positioned to take advantage of the long-term opportunities for FPGAs as a data center or artificial intelligence driven platform, the analyst said. He added, however, that at this time the company’s data center growth warranted “a cautious view.”

“We are positive on Xilinx's long-term positioning for FPGA compute acceleration, a materializing 5G cycle, as well as the competitive positioning of the company's 7nm Versal ACAP,” Rakers wrote.

However, the analyst mentioned that the company’s data center business is currently a "prove it" story and near-term pressures and concerns could limit meaningful fundamental improvement as well as upside to the stock.

XLNX Price Action

Shares of Xilinx were down 0.55% to $90.67 at time of publication.