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Maxim Stock Rallied on Acquisition Rumors, Rated a ‘Buy’

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Jan. 28 2016, Updated 7:06 p.m. ET

Maxim stock overview

So far in this series, we’ve seen that Maxim Integrated (MXIM) posted a 10% year-over-year fall in fiscal 2Q16 revenue. But the company is optimistic about its results for fiscal 3Q16. In the December 2015 quarter, the company achieved key milestones in its cost savings plan. Lets’s see how these announcements affected the company’s stock over the quarter.

The stock has a market capitalization of $9.2 billion and a price-to-earnings ratio of 54.5—which is way ahead of the industry average of 17.3. Rivals STMicroelectronics (STM) and Texas Instruments (TXN) have price-to-earnings ratios of 39.4 and 18.1, respectively.

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Stock price movement

Maxim stock is currently hovering around $32, which is at the lower end of its 52-week range of $29.47–$42.18. The stock started to rally in October 2015 as rumors spread that the company was in acquisition talks with Analog Devices (ADI). The stock reached a peak of $42 on October 28, 2015, when Texas Instruments was also believed to be interested in acquiring Maxim, according to a Bloomberg article.

The stock later fell and continued along a downward path until it reached $37 in December 2015. The stock fell steeply to its current price of around $32 on January 8, 2016, when both TXN and ADI confirmed that they decided against the acquisition, as Maxim demanded a higher premium.

Maxim is now once again open to an acquisition offer, and it will likely attract Chinese (FXI) buyers such as Tsinghua Unigroup.

Analyst rating

Analysts have rated the stock a “buy” and set an average 12-month price target of $38.05. However, just before the earnings release, the average annual price target was set at $38.92. The most bullish estimate was $45 and the most bearish estimate was $31.

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