On Thursday, Benchmark adjusted its outlook on MaxLinear (NASDAQ:MXL), a semiconductor company, by lowering the price target to $22 from the previous $28 while maintaining a Buy rating on the stock.
The adjustment follows MaxLinear's continued challenges with visibility and execution, which have led to a streak of disappointing quarterly results. The anticipated recovery in revenue for the first quarter did not occur, and the situation appears to be extending without a clear end.
MaxLinear's second-quarter revenue fell short of the company's own mid-point guidance by 8%, despite an improvement in bookings trends and progress in reducing inventory. The revenue decline from the previous quarter was largely attributed to geopolitical issues in China, which also contributed to a significant shortfall in the third-quarter outlook, coming in 28% below consensus.
The series of revenue declines, now totaling seven quarters, has prompted concerns about the underlying factors affecting the company's performance. Nevertheless, after a 72% revenue decline, there is a belief that the worst may have passed and growth could resume as new product introductions start to have a significant impact.
In other recent news, MaxLinear, Inc. has faced a downgrade to Hold from Buy by Needham due to consistent underperformance in revenue guidance. The firm's downgrade was influenced by MaxLinear's ongoing challenges, including competition from Broadcom (NASDAQ:AVGO) and the potential $160 million breakup fee associated with SIMO overhang.
Another factor contributing to the company's struggles is the impact of China export restrictions, which are further straining MaxLinear's revenue.
Despite these challenges, MaxLinear reported Q2 2024 revenues of $92 million and a non-GAAP gross margin of 60.2%. The company has managed to stay resilient amid weakened demand in the broadband market and regulatory challenges in telecom shipments. They are optimistic about future growth, driven by new product launches and a strategic reduction in R&D investment spend.
Furthermore, MaxLinear has projected Q3 2024 revenue to be between $70 million and $90 million. The company is focusing on operational efficiency and shareholder value, with plans to decrease operating expenses by 20-25% for fiscal 2025 compared to fiscal 2024.
Recent developments also suggest potential growth opportunities with a Tier 1 U.S. carrier for integrated PON and 10 gig processor gateway.
InvestingPro Insights
As MaxLinear (NASDAQ:MXL) navigates through a period of financial turbulence, InvestingPro data provides a deeper dive into the company's performance. With a market cap of approximately $1.85 billion and a negative P/E ratio reflecting investor concerns about profitability, the company's challenges are evident in the real-time metrics. The revenue has seen a sharp decline over the last twelve months as of Q1 2024, with a staggering 51.11% drop, underscoring the difficulties MaxLinear faces.
InvestingPro Tips suggest caution, as analysts have revised their earnings expectations downwards and anticipate a sales decline in the current year. Additionally, the stock has experienced significant volatility with an 8.8% drop in the one-week price total return, which may concern potential investors. On the positive side, MaxLinear's liquid assets surpass its short-term obligations, indicating some degree of financial stability in the near term.
Subscribers to InvestingPro can access further analysis and tips, with 9 additional InvestingPro Tips available for MaxLinear, offering a comprehensive view of the company's financial health. For those looking to delve deeper into MaxLinear's financials and future prospects, use coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription at InvestingPro.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.