Xilinx (NASDAQ:XLNX) tanked by over 10% after the company reported quarterly earnings. The company beat consensus revenue estimates, so why is the market bearish on Xilinx?
Xilinx reported revenue of $828 million, up 29.8% from last year. Investors may have expected a wider beat on earnings and sales, so the short-term drop could prove temporary. The key opportunity may come from long-term prospects.
Shareholders were caught off-guard from the announced acquisition of Solarflare. This company is a supplier of networking solutions, so the acquisition will enable converged SmartNIC solutions to address dynamic workloads in the data center (read more about it here).
Outlook
Xilinx updated it first-quarter revenue guidance. It now expects revenue of $835-$865 million and gross margin of 66%. Unfortunately for anyone who held the stock before the earnings report, the selling momentum is now building. In today’s market, traders buy high and buy even higher to ride the momentum. For XLNX stock, the opposite is happening: traders need to wait for the stock to bottom first.
The Solarflare acquisition could also distract management in the near-term. Expect results just meeting estimates instead of beating them. For now, XLNX stock is a stock to add to the watch list.
