Clal Finance sees 37 percent upside in Mellanox
Sep 19, 2012 (Menafn - Globes - McClatchy-Tribune Information Services via COMTEX) --"We have the impression that the strong business momentum will continue with the widespread adoption of InfiniBand/Internet solutions (which have a penetration rate of just 10 percent)," says Clal Finance analyst Jonathan Kreizman after meeting Mellanox Technologies Ltd. MLNX(tase:MLNX) chairman, president and CEO Eyal Waldman. "Following the approval of the guidance for the third quarter of 2012, we expect further growth in sales for the fourth quarter with the launch of the Windows Server 2012 and massive entry into the storage market."
Kreizman gives Mellanox a "Buy" recommendation with a target price of 140, 37 percent above yesterday's closing price of 102.15 on Nasdaq, giving a market cap of 4.25 billion. He predicts earnings per share of 4.84 for 2013 (above the analysts' consensus of 4.20 earnings per share).
Kreizman says that despite doubts about demand for 56 Gbps (FDR) connectivity, Mellanox is already seeing customer demand for 100 Gpbs enhanced data rate (EDR) connectivity, and it plans to have a solution for this speed on the market in 2014. Until the launch of enhanced data rate (EDR), Mellanox is expected to have hegemony in the Infiniband market, after Intel Corporation INTC announced that it will develop FDR InfiniBand technology, rather than compete against it in the current generation technology sector.
Kreizman adds, "The company sees steady growth in 10 GbE and 40 GbE Ethernet solutions. After enjoying strong demand from Web 2.0 customers (reporting 14 percent growth in the fourth quarter of 2011), we believe that Mellanox is continuing its growth in Ethernet-based solutions (as Web 2.0 solutions still have a low penetration rate). We expect to see the first 40 GbE sales in the third quarter of 2012, and stronger growth during 2013. (Mellanox is the first to market with 40 GbE processors, and we only expect the first competitor in the first quarter of 2013).
Kreizman expects to see strong growth in the fourth quarter, compared with the preceding quarter, driven by strong market demand for storage and data centers solutions by Intel and other companies, a stronger market entry by EMC Corporation EMC, the launch of InfiniBand and RDMA supporting Windows Server 2012 , and further manpower growth at Mellanox.
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