Xilinx Acts as a Lodestone, Pulling Most Semiconductor Leaders Lower

Jon C. Ogg

Xilinx Inc. (NASDAQ: XLNX) had been helping the semiconductor’s charge in 2019, with its year-to-date gain of 64.5%, and up over 1,105% from a year ago, ahead of its first-quarter earnings report. Unfortunately, the post-earnings reaction was dismal and Xilinx was set to have its worst trading day going all the way back to 2005.

The designer of programmable logic devices and system-on-a-chip had experienced rapid growth due to many of the emerging trends in technology that are expected to have massive demand in the decade ahead. The company also focuses on delivering products to electronic equipment manufacturers for products in too many industries to easily count: wireline and wireless communications, data centers, aerospace and defense, automotive and transportation, testing and measurement, industrial sectors, scientific and medical, video and broadcast, and consumer products.

The disappointment from Xilinx was that the $245 million in quarterly profits, or $0.94 per share after adjustments, was compared to $0.95 per share that had been expected by FactSet. Even though this was far higher than the $145 million (or $0.56 per share) a year earlier, that 65% or so gain demanded more from the company than it delivered. Revenue rose to $828.4 million from $638.2 million a year earlier, beating the FactSet consensus of $826 million.

The company guided the June quarter revenues to a range of $835 million to $865 million, while the Refinitiv consensus estimate is $832 million. Xilinx missed the midpoint of gross margins by about 100 basis points and guided the June quarter to what would be about 150 basis points lower due to a mix of segments.

While financial terms were not disclosed, Xilinx also announced that it planned to acquire privately held Solarflare Communications, a provider of high-performance and low-latency networking solutions, after it became a strategic investor in the company in 2017.

Xilinx was downgraded to Neutral from Buy with a $122 price target at Goldman Sachs, with the firm seeing more balanced risk/reward at this time and a lack of near-term upside after such a strong run higher. Other analyst calls were seen after the earnings report, with another formal downgrade and even more price target cuts than that. These were seen as follows:

  • Merrill Lynch maintained its Buy rating, and its price objective was $143 at the time of its flash call after earnings.
  • Needham downgraded Xilinx to Hold from Buy
  • Deutsche Bank maintained its Hold rating and lowered its target to $120 from $125.
  • Cowen maintained its Market Perform rating and lowered its target to $120 from $130.

While the numbers were not atrocious, much more had been baked into the cake here ahead of earnings. With Xilinx down over 15% at $118.16 on last look, it has a 52-week trading range of $63.74 to $141.60.

Xilinx also acted as a catalyst to send other high-flying chip and circuit companies lower as well, while some positive moves were still seen in some of the specialized chip-makers.

Nvidia Corp. (NASDAQ NVDA) was down 2.2% at $186.88, in a 52-week range of $124.46 to $292.76 and with a consensus target price of $183.19.

Advanced Micro Devices Inc. (NASDAQ: AMD) was 2.6% lower to $27.71, in a 52-week range of $10.61 to $34.14 and with a consensus target price of $25.29.

Qualcomm Inc. (NASDAQ: QCOM) had seen its shares jump a whopping 50% in less than two weeks after it settled its legal fight with Apple, but the shares were down 1.3% at $85.65 on some excuse for profit-taking.

Broadcom Inc. (NASDAQ: AVGO) was last seen down 1.6% at $309.22. Its market cap is $121 billion, and it has a 52-week range of $197.46 to $322.45. The consensus target price was $312.45.

Even the mighty Intel Corporation (NASDAQ: INTC) was down 1.9% at $57.60 ahead of its earnings report as investors decided to sell some of the strength that has been seen. With a $42.36 to $59.59 range in the past 52-weeks, Intel has a $258 billion market cap and a consensus target price of $54.59. The shares were still up over 23% year to date, even with Thursday’s pre-earnings pullback taken into consideration.

It’s one thing to have a big drop after earnings, but it’s another thing to have a large drop on a huge volume spike that is also one of the worst days in over a decade. The 12 million shares that had traded hands by 11:00 Eastern Time was already more than 300% above a normal trading day’s entire volume.