Xilinx, Inc. (XLNX) Fundamentals Look Strong

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Although earnings season is right around the corner, I wanted to do some early research on Xilinx, Inc. (NASDAQ:XLNX) while shares are near 52-week peaks.

XLNX Stock: Xilinx Technicals and Fundamentals Look Strong

The company has matched or topped earnings estimates during three of the past four quarters by 5 cents, 2 cents and 1 cent, with a match in the mix. Revenues have topped estimates during the past three quarters but missed by $1.58 million in the year-ago period.

Gross margins have pushed 70% over the past year, which is a number that analysts will want to see sustained. A number below this level or a lowered outlook on an earnings miss could send shares sharply lower.

XLNX stock’s next earnings report is scheduled to be released on Oct. 19, and current estimates are pegged at 55 cents a share on revenue just south of $575 million.

I love the technical and fundamental picture for Xilinx, and analysts have been mostly bullish on the stock throughout the year. In mid-August, one of the suits-and-ties raised their price target on XLNX stock from $55 to $65 while keeping an “outperform” rating on the stock.

In June, with shares at $46, another brokerage firm reiterated its “outperform” rating and $52 price target. On the other hand, at the start of the month, an analyst out of Goldman Sachs lowered their rating to “neutral” from “buy” and set a $51 price target. The reason cited was “limited upside,” with shares closing above $47 the prior session.

In May, the company’s board approved a $1 billion share-buyback program. This was a bullish sign, and it came a few weeks after Xilinx lowered its earnings forecast and outlook in late April. Shares fell from $47.35 to close at $43.23 following the quarterly results.

Bottom Line for XLNX Stock

Xilinx develops integrated circuits and software design tools used to in programmable logic devices. The company has been subject to takeover rumors throughout the year, with Intel Corporation (NASDAQ:INTC), Qualcomm, Inc. (NASDAQ:QCOM) and China’s Tsinghua Holdings floated as possible suitors.

Earlier this year, the company filed a change in control provision, with the SEC saying that it would provide additional benefits to its top executives if XLNX stock is acquired.

The chances of the company being acquired are real. However, I don’t believe that management appears anxious to sell given the terrific business it has developed and the long-term growth opportunities in autonomous driving. With a market cap of just over $13 billion, a 50% premium would value the company at $20 billion for roughly a $75-per-share buyout offer.

While I don’t like buying stocks on rumors, I do like the technical and fundamental setup for Xilinx going forward.

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