MaxLinear Stock is a Worthy Chip Play

Broadband connectivity chip maker MaxLinear NYSE: MXL stock is hitting all-time highs on its Q3 2021 earnings results. The radiofrequency chipset maker was a big winner during the pandemic as the stay-at-home mandates spurred the birth of the remote worker evolution. The reopening trend progresses with the acceleration of COVID-19 vaccinations has not caused a reversion in the Company’s metrics. In fact, the Company expects demand to grow as broadband service providers and operators bolster capex to accommodate bandwidth-intensive consumer applications that enable remote workflow in the new normal. The growth of automotive connectivity especially in electric vehicles (EVs) is also expected to bolster revenues beyond the pandemic bump. The Company has a handle on the global chip shortage.  Prudent investors can watch for opportunistic pullback levels to gain exposure in shares of MaxLinear.

Q3 FY 2021 Earnings Release

On Oct. 27, 2021, MaxLinear released its fiscal third-quarter 2021 results for the quarter ending Sept 2021. The Company reported an earnings-per-share (EPS) profit of $0.75 excluding non-recurring items versus consensus analyst estimates for a profit of $0.67, an $0.08 beat. Revenues grew 46.7% year-over-year (YoY) to $229.77 million beating analyst estimates for $224.76 million. MaxLinear CEO Kishore Seendripu commented, “In the third quarter, revenue was up 12% sequentially and up 47% year-over-year, driven by growth across our broadband, connectivity, and industrial and multi-market markets. Solid demand for our broadband access and connectivity and high-performance analog products was due to a combination of end-market strength and company-specific drivers, including platform-level silicon content increases and market share gains. Non-GAAP gross margin for Q3 of 61.3% is ahead of our original plan, as product mix shift towards higher-value products continues to accelerate across broadband, connectivity, infrastructure, and high-performance analog end markets. We remain focused on improving the supply chain constraints to meet the strong and growing market demand for our connectivity, broadband, and infrastructure products in the short and long term”

Raised Q4 2021 Guidance

MaxLinear raised its Q4 fiscal 2021 guidance with revenues coming in between $240 million to $250 million versus $229.42 million consensus analyst estimates. Gross margins are expected in the range of 60% to 62%.

Conference Call Takeaways

CEO Seendripu set the tone, “Despite the semiconductor industry's ongoing supply chain challenges, our financial outlook for Q4 is strong. It reflects continued improvements in our supply chain operations, strong secular growth trends across our end markets, and our company-specific growth drivers. Turning to some of the Q3 business highlights. Broadband revenue was $126 million in Q3, up 12% versus Q2 driven by new program ramps, share gains, content per platform increases, and strong end-market demand. As service providers and operators ramp their capital expenses to address new bandwidth-intensive consumer application services. We will benefit from this organic mix shift to more technology-intensive consumer premise equipment in the near and long term. We are also winning many platform designs across multiple geographies in new end markets, such as fiber broadband, where historically, we have had a little share. These design win activities will provide strong revenue growth over the next several years. Connectivity revenue was $38 million in Q3, strongly up sequentially at 21%. We expect Q4 to be our third straight quarter of solid double-digit sequential growth. Our comprehensive connectivity portfolio spans Wi-Fi, Ethernet, and MoCA, and underpins our strong long-term growth trends. We see sustained momentum for our Wi-Fi products as operators address strong consumer demand for robust broadband access and connectivity services. Over the next several quarters, we expect the launch of a multitude of next-generation Tier 1 platforms, incorporating our WAV600 and WAV600 Release to solutions, including our triband offerings. This mix shift to higher-value Wi-Fi products will drive higher blended pricing as well. Also, our silicon content will increase materially as the attach rate of our Wi-Fi solution to MaxLinear's own gateway SoCs greatly increases as operators refresh their gateway platforms in the new upgrade cycle. In total, we expect connectivity to be one of our fastest-growing end markets for the next several years.” He concluded, “In summary, our company's specific growth drivers are now solidly in place with an emphasis on share gains, new product cycles, and increasing silicon footprint with new and existing customers across all four of our end markets. With a continued focus on developing new and disruptive technologies across our high-value end markets, we expect to outperform semiconductor industry growth rates over the long term.”

MXL Opportunistic Pullback Levels

Using the rifle charts on the weekly and daily time frames provides a precision view of the price action playing field for MXL shares. The weekly rifle chart formed a pup breakout exploding towards the $64.37 Fibonacci (fib) level. The weekly 5 periods moving average (MA) support is rising at $52.60 followed by the 15-period MA at $51.16. The weekly upper Bollinger Bands (BBs) briefly overshot at $63.74. The weekly stochastic has just crossed back up through the 70-band. The weekly market structure low (MSL) buy triggered a breakout above $53.66. The daily rifle chart formed a pup breakout with a rising 5-period MA support at the $56.80 fib with upper BBs at $62.06. The daily stochastic is attempting to form a high-band cross up above the 80-band. Prudent investors should avoid chasing and rather watch for opportunistic pullback levels at the $59.20 fib, $57.53 fib, $56.30 fib, $54.26 fib, $52.22 fib, $49.98 fib, and the $48.01 fib. Upside trajectories range from the $70.51 fib up towards the $87.62 fib.