MaxLinear stock is a Buy, says Roth

Investment bankers Roth MKM issued an update on Monday on chip company MaxLinear (MaxLinear Stock Quote, Charts, News, Analysts, Financials NYSE:MXL), with analyst Suji Desilva saying he’s reaffirming a constructive outlook on MXL as we wait for news on the proposed merger with Silicon Motion.

California semiconductor company MaxLinear makes integrated, radio-frequency and mixed-signal integrated circuits for broadband communications and data centre, metro and long-haul transport network applications. Roth Capital Partners recently hosted a MaxLinear investor webinar, where Desilva said management is still committed to seeing the Silicon Motion deal go through and that industry end demand remains reasonable for MaxLinear, with an inventory workdown likely progressing as expected over the next few quarters.

The Silicon Motion deal, first announced last May and pegged at $3.8 billion, is currently awaiting approval from Beijing. Desilva said MaxLinear management is expecting a result on regulatory hurdles later this summer.

“While macro, fundamental and market conditions have been choppy since the announcement last year, we believe that MXL remains committed to its planned acquisition of Silicon Motion. While the geopolitical situation has become more challenging, we believe nonetheless that SIMO is progressing its discussions with China regulatory authorities, whose approval remains the last hurdle for completion,” Desilva wrote.

The analyst said despite the high price tag and expected debt load for MXL, the Silicon Motion acquisition should be doable, as MaxLinear continues to have committed bank financing.

“We believe the deal carries meaningful synergies with the potential for finer tuned operating expenditures and cost of goods opportunity through larger scale purchasing among foundry and packaging vendors. We will look for additional progress ahead of the early-August outside date. We maintain our Buy rating,” Desilva wrote.

With the “Buy” rating, Desilva also maintained a 12-month price target of $40.00 on MaxLinear, which at press time amounts to a projected return of 38.7 per cent. 

MaxLinear last reported earnings in April, where its first quarter 2023 results showed net revenue down six per cent year-over-year and down 15 per cent sequentially to $248.4 million and EPS of $0.74 per share compared to $1.07 per share a year earlier. (All figures in US dollars.)

Management guided for further declines in the upcoming second quarter and called for revenue of $175-$205 million.

Desilva is forecasting second quarter revenue and EPS of $190.0 million and $0.32 per share, respectively, and for the full 2023 year, revenue and EPS of $815.4 million and $1.83 per share, respectively.