Fabless semiconductor company Mellanox Technologies (NASDAQ:MLNX) has been on a tear this year, up 240% in just more than seven months!
The company builds technologies that help improve the storage capacity for datacenters — a key to the megatrends of cloud computing and Big Data.
In the latest quarter, sales spiked by 111% to $133.5 million and earnings came to 99 cents. The third-quarter outlook also was robust, with sales expected to rise by 124%.
So why should you jump off the bandwagon? Mellanox’s stock is trading at a nosebleed valuation of 84 times trailing earnings and 26 times forward earnings. While those numbers are justified in light of its growth, MLNX could see a big dip if it shows any signs of decelerating. Yes, Mellanox deals in the trends of the future, but it’s certainly not invulnerable should the global economy continue to show signs of weakness.