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Don't Buy Misguided Bet on Mellanox

NEW YORK (TheStreet) -- Everything is relative in the stock market. And sometimes expectations have more to do in determining success than a company's actual performance.

To that end, when compared to last year's 25% gains of the S&P 500, chip-related stocks, which added (just) 20% to investors' portfolios, were a relative disappointment. But Mellanox (MLNX - Get Report) investors can only wish this company was as "unfortunate."

Due to (among other things) the company's industry-leading data center and storage technologies, Mellanox was one of the industry's best performers in 2012. Everything then was about "Big Data" and how the storage cloud would take over enterprises. The Street salivated over the company's growth potential, while rewarding the shares with higher valuations.

Unfortunately, Mellanox couldn't deliver the goods in 2013. With the stock price declining 33% for the year, the company was a notable underperformer. But that hasn't stopped the Street from hopping back on the bandwagon. After recent meeting with the company's management, analysts at Stifel, which has a $55 price target on the stock, see Mellanox benefiting from a rebound in the HPC (high-performance computing) market as well as in the company's other segments.

This optimism was followed by Maxim Group analyst Ashok Kumar, cited the company's "InfiniBand" high-speeding networking standard and raised his rating on the stock to buy from hold. Kumar believes that Mellanox can "hold its own" even amid competitive threats from rivals whose platforms are based on the Ethernet standard.

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