Trade of the Day: XLNX Stock is Worth Taking a Gamble On

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Xilinx, Inc. (XLNX) — XLNX stock gapped up on Jan. 21 after the chipmaker delivered its fiscal third-quarter report. Revenue declined 4.6% year over year to $566.2 million, while adjusted earnings fell 21% to 49 cents per share.

While sales and profits were down, the company still beat analysts’ expectations on both the top and bottom line. However, the rally in XLNX stock was largely attributed to fresh buyout hopes.

Along with the quarterly report, Xilinx, which makes programmable chips for communications infrastructure, automobiles and industrial uses, disclosed in a filing with the Securities and Exchange Commission (SEC) that it had entered into a change-of-control provision that protects five senior executives, including the CEO, in the event of a change of ownership.

Following the earnings release, BMO Capital Markets upgraded XLNX stock to “Outperform” from “Market Perform” and raised its price target to $57 from $44. Last week, its analysts increased their target again, this time to $60, noting the company’s solid financial position, reasonable debt levels and expanding profit margins.

Turning to the chart, XLNX stock rose from a low around $36 in October 2014 to a high above $50 in early December, a gain of 40% in about 14 months.

My proprietary internal indicator, the Collins-Bollinger Reversal (CBR) has proved accurate with XLNX stock, correctly signaling both buys and sells. It triggered a sell signal at the December high, and on Jan. 15, it flashed a buy signal at about $40. Another CBR buy signal was triggered on March 7 at $46.

My initial upside target for XLNX stock is $50, which is 5% above the current price. However, if a takeover were to occur, the return could be much greater, making shares worth a modest investment at current prices. The downside risk in XLNX stock is likely limited to $42.

XLNX Stock Chart
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Article printed from InvestorPlace Media, https://investorplace.com/2016/03/xilinx-inc-xlnx-stock-trade-day/.

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