MACOM Technology (NASDAQ:MTSI) has been on a decline,
shedding 38% of its market share since July. Stifel’s downgrade further
shattered investors’ confidence as the firm cited weakness in China as
worrisome for MACOM.
Negative sentiment is fueled by the slowdown in
growth, acquisition costs and integration challenges related to newly acquired
businesses like AppliedMicro.
Nonetheless, long-term
prospects remain positive. The industry is set to grow, thanks to the
exponential growth of cloud data centers and upcoming switch to 5G in the
telecom industry. Recent weakness in growth and margin is a short-term
headwind. MACOM continues to post double-digit revenue growth. Negative
sentiment is overstated.
The market is reacting to short-term integration
headwinds and a slowdown in growth. It's ignoring the fact that
acquisition-related costs are a short-term headwind; integration benefits will
follow. Further, industry analysts have a consensus on growth. Only some
predict the slowdown to persist, but that’s also for a year. Over the long run,
the stock is poised to benefit from industry growth. MACOM seems to offer some
value in a stock market that’s flooded with overpriced momentum stocks.
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