Mellanox Technologies Ltd. (MLNX:US) is set for its longest stretch of monthly declines since 2008 as analysts estimate revenue for the best performing Israeli company in New York last year will decline.
Shares of the maker of software used to transfer and store data have declined 3 percent in February and are set for a sixth monthly retreat (MLNX:US), the longest rout since the end of November 2008. The stock’s average 50-day volatility was at 74.6 in the 12 months to yesterday, up from 47.6 the previous year. The Bloomberg Israel-US Equity Index (ISRA25BN) of the biggest Israeli stocks in the U.S. fell the most in seven weeks, led by MagicJack VocalTech Ltd. and Nova Measuring (NVMI:US) Instruments Ltd.
Mellanox slumped after management delivered two quarterly sales forecasts that missed estimates. The Yokneam Elit, Israel- based company, whose shares rallied (MLNX:US) 83 percent in 2012 on surging demand for its Infiniband technology, is facing increased competition as Intel Corp. (INTC:US), the world’s largest chipmaker, develops a similar product. Analysts have cut (MLNX:US) their 2013 sales estimates to $447.6 million from $659.3 million in September, according to data compiled by Bloomberg.
“Their story has changed, and there’s been a pretty big speed bump,” Rajesh Ghai, an analyst at Craig-Hallum Capital Group LLC who rates Mellanox hold, said by phone from Dallas yesterday. “The long-term prospects are pretty good, but with the stock being so volatile in the last six months, the market is still trying to make up its mind.”
Santa Clara, California-based Intel acquired on Feb. 29 QLogic Corp.’s InfiniBand business for $125 million, competing with Mellanox’s technology. Three months later, Intel bought Cray Inc.’s technology to connect server chips for $140 million.
Mellanox’s prospects depend on how aggressively Intel decides to enter the market in 2014, Jonathan Kreizman, an analyst at Clal Finance Batucha Brokerage Ltd., said by phone from Tel Aviv yesterday.
Mellanox forecast (MLNX:US) on Jan. 23 first-quarter sales that trailed estimates by as much as 48 percent amid a build-up in inventory by one of its customers. Sales for the three months ended March will reach $78 million to $83 million, the company said. Earlier that month, Mellanox cut its fourth-quarter revenue forecast on weaker demand and a product glitch.
Palisade Capital Management LLC, which manages about $3.6 billion of assets, sold its Mellanox holding last year after Dennison Veru, the firm’s chief investment officer, said by phone from Fort Lee, New Jersey on Feb. 12.
The stock had “a huge run in a very compressed period of time,” he said. “The company put up some very strong quarters but then started missing on some of these issues.”
Mellanox is currently the target of class action complaints and law firm investigations in Tel Aviv and New York, according to data compiled by Bloomberg. A class action complaint filed by Robbins Geller Rudman & Dowd LLP on Feb. 7 alleges Mellanox issued “false and misleading statements” about its financial performance and outlook.
“That’s quite a few to be honest,” Craig-Hallum’s Ghai said. “But this is par for the course in the tech industry. As long as the SEC doesn’t file an investigation, I don’t see cause for concern.”
Mellanox fell 1.8 percent to $51.64 in New York, the lowest price since Jan. 30. Shares traded in Tel Aviv dropped 3.8 percent to 192.2 shekels, or the equivalent of $51.97.
The Bloomberg Israel-US index slid 1.3 percent to 87.05 yesterday, its biggest slump since Jan. 3. Israel’s benchmark TA-25 (TA-25) Index declined 1.9 percent to 1,218.
MagicJack, based in Netanya, Israel, sank 8.1 percent to $11.52, the lowest price in 14 months. The stock’s 10-day volatility (CALL:US) of 62.7 is the highest since Jan. 22.
Nova Measuring declined 4.4 percent to $9.04 as shares in Tel Aviv fell 1 percent to 33.4 shekels, or the equivalent of $9.03. The New York-traded shares’ premium rose to 27 cents on Feb. 20, the highest in a month.
Syneron Medical Ltd. lost 0.9 percent to $10.43. The maker of aesthetic medical products settled its U.S. patent infringement lawsuit against EndyMed Ltd. and Eclipse Aesthetics. The parties agreed to immediately stop selling Caesarea, Israel-based Endymed’s fractional skin resurfacing products in the U.S.
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