Xilinx falls amid growth concerns
By Carolyn Pritchard, CBS MarketWatch.com
Last Update: 4:16 PM ET April 19, 2002
marketwatch.com
SAN JOSE, Calif. (CBS.MW) -- Even after reporting fourth-quarter earnings that beat estimates, shares of chipmaker Xilinx ended Friday's session 3 percent lower as investors questioned the sustainability of its results.
Xilinx (XLNX: news, chart, profile) on Thursday reported fourth-quarter pro forma earnings of $43.4 million, or 12 cents a share, on revenue of $273 million, compared with the year-ago profit of $65.7 million, or 19 cents a share, on revenue of $407 million.
That handily beat a consensus of analysts polled by Thomson Financial/ First Call, who were expecting Xilinx to post a profit of 9 cents a share.
But after a short spike upwards in the first half an hour of trading, the company's shares fell, trading as low as $41.15, a 4.2 percent slide.
The stock closed down $1.27, or 3 percent, at $41.67.
Including one-time items, Xilinx reported net income of $34.3 million, or 10 cents a diluted share, compared to a net loss of $161 million, or 49 cents per share, in the same period a year earlier.
Xilinx "blew out its March quarter," according to a Friday research note from Prudential analyst Hans Mosesmann. "Advanced products were up an awesome 49 percent sequentially and continues to help Xilinx gain market share resulting in increased revenues going forward," wrote Mosesmann. He raised his price target on the shares to $57 from $52.
And he wasn't alone. Robertson Stephens analyst Eric Rothdeutsch, who raised his estimates for the full-year 2003, called Xilinx's quarterly performance "simply amazing." Rothdeutsch reiterated his "strong buy" rating and 12-month price target of $50.
But some analysts also issued notes of caution.
UBS Warburg's Thomas Thornhill, who upped his estimates for all four quarters and the full-year of 2003, maintained his "hold" rating on the stock. "We caution that a sustainable acceleration in sales will be a function of end-market demand," wrote Thornhill, "which we believe continues to be weak."
Watching Xilinx's shares trade lower Friday, Thornhill said that investors are looking closely at the reasons behind the firm's strong results and are questioning their sustainabilty.
"While the March quarter was certainly an excellent quarter, a considerable portion of the increase is attributed to two things that may nor may not continue or support sustained growth." One is a snapback in inventory, which came as a result of Xilinx shipping its products to customers at less than their consumption rate of the last several quarters. Management, he said, attributed a portion of the growth to inventory restocking. "Once inventories come in line," said Thornhill, "you get a surge."
As well, said Thornhill, as much as half of the firm's growth was attributed to third-generation wireless development activity, which was unexpected and which management has acknowledged is likely to be lumpy -- on other words, it could surge in one or two quarters during early phases of 3G cell services development, and not rise again until the industry begins to truly grow. "The implication is that growth is uncertain following that limited visibility," said Thornhill.
Merrill Lynch's Chris Danely, who has Xilinx rated "buy," with a 12-month price target of $48, agreed. He also said the downward move on the stock is due in large part to the old "buy on rumor sell on news," theory.
"Whenever a company gets results like this, "People say 'It can't get any better than this.'"
In a company conference call, Xilinx said that it expects revenue to grow 25 percent to 30 percent in fiscal 2003. |
