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Understanding Changes in Maxlinear’s Risk Factors
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Understanding Changes in Maxlinear’s Risk Factors

Maxlinear (MXL) is a semiconductor solutions company based in California. Its products, which include radio-frequency, analog, and mixed-signal semiconductors, are used in broadband communications applications.

Let’s take a look at the company’s latest financial performance and changes in risk factors. (See Maxlinear stock charts on TipRanks).

Q2 Financial Results and Q3 Outlook

Maxlinear’s revenue for Q2 2021 increased 215% year-over-year to $205.4 million and beat the consensus estimate of $204.75 million. The company said revenue increased across all of its markets and that it gained market share in the quarter. Adjusted EPS of $0.53 increased from $0.09 in the same quarter last year and beat the consensus estimate of $0.50. Maxlinear ended Q2 with $131.43 million in cash.

For Q3, the company anticipates revenue in the range of $215 million to $225 million. The consensus estimate calls for revenue of $202.7 million.

There is a strong and growing demand for Maxlinear’s products. CEO Kishore Seendripu said the focus now is on improving the manufacturing supply chain to meet the demand. Seendripu acknowledged that the global semiconductor supply chain continues to experience challenges. However, the executive said that they are increasingly confident in the future.

Risk factors

The new TipRanks Risk Factors tool shows that Maxlinear has removed four risk factors from its risk profile since Q4 2020. As a result, the company’s total risks have dropped to 47 from 51 previously.

In 2020, Maxlinear acquired NanoSemi and Wi-Fi and broadband assets from Intel (INTC). It has removed the risk factor that cautioned investors that its operating results and financial condition may be adversely affected if it failed to successfully integrate the acquired businesses.

The company has dropped the risk factor that warned investors that it could take significant charges against its earnings as a result of the high costs of integrating the acquired businesses.

Maxlinear has also removed the risk factor that warned about a possible loss of key personnel in connection with the acquisitions. The company had warned that some of its employees may become concerned about the future of their roles following its completion of the acquisitions. As a result, some key employees could depart, which could cause it to incur significant costs to replace them. It said that could reduce the expected benefits of the acquisitions and have a material adverse impact on its business and financial condition.

The majority of Maxlinear’s risk factors fall under the Finance and Corporate category, with 28% of the total risks. That is below the sector average of 40%. Maxlinear’s stock has gained about 29% year-to-date.

Analysts’ Take

In September, Craig-Hallum analyst Richard Shannon reiterated a Buy rating on MaxLinear stock and raised the price target to $75 from $60. The analyst’s new price target suggests 52.28% upside potential. Shannon noted that MaxLinear’s broadband business will continue to grow as the company gains more market share, especially in the fiber segment. Further, the analyst sees strong growth in the Wi-Fi business.

Consensus among analysts is a Moderate Buy based on 7 Buys and 3 Holds. The average Maxlinear price target of $56.50 implies 14.72% upside potential to current levels.

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