The firm said it raised its rating on the fabless semiconductor company as it sees the next "18-24 months of tailwinds in the interconnect space driven by strength in the HPC industry, the Grantley server refresh cycle, data center and storage spending trends, strength in the 40G market and the eventual move towards 100G."
"We do expect increased competition in the interconnect space but we like Mellanox's position in the high end niche where we believe the benefit will materialize," Barclays added.STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.
The firm has a $57 price target on Mellanox stock, up from $50.
Separately, TheStreet Ratings team rates MELLANOX TECHNOLOGIES LTD as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate MELLANOX TECHNOLOGIES LTD (MLNX) a HOLD. The primary factors that have impacted our rating are mixed some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its increase in net income, revenue growth and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we find that the company's return on equity has been disappointing."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Semiconductors & Semiconductor Equipment industry. The net income increased by 107.3% when compared to the same quarter one year prior, rising from -$5.89 million to $0.43 million.
- Despite its growing revenue, the company underperformed as compared with the industry average of 18.6%. Since the same quarter one year prior, revenues rose by 16.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Net operating cash flow has slightly increased to $17.20 million or 4.73% when compared to the same quarter last year. Despite an increase in cash flow, MELLANOX TECHNOLOGIES LTD's average is still marginally south of the industry average growth rate of 11.46%.
- MELLANOX TECHNOLOGIES LTD reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, MELLANOX TECHNOLOGIES LTD swung to a loss, reporting -$0.54 versus $2.53 in the prior year. This year, the market expects an improvement in earnings ($1.07 versus -$0.54).
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Semiconductors & Semiconductor Equipment industry and the overall market, MELLANOX TECHNOLOGIES LTD's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full analysis from the report here: MLNX Ratings Report