Outperform - Price 16.50 on Sept. 5
by Pacific Crest
Initiating at Outperform based on MLNX's prospects of 40% or higher growth, healthy operating margin of 22% or higher, leading position in InfiniBand silicon with roughly 85% market share, expanding ecosystem of 100 partners and attractive risk/reward ratio at 15 times our 2009 earnings per share estimate....Adoption of multicore processors, grid clusters and virtualization is driving the need for faster connections.... MLNX has declined 22% since the end of June because of the [initial-public-offering: February] lockup expiration, despite healthy fundamentals. We would build positions below $20 with upside to 26 based on DCF analysis and target price/earnings multiple of 28 times our '08 EPS estimate.