Mellanox Technologies Ltd. (MLNX), the Israeli maker of technology used to transfer and store data, climbed to the highest level on record in after-hour New York trading as its third-quarter sales forecast surpassed estimates.
The technology developer soared 44 percent to $95.36 at 6:40 p.m. in New York yesterday as the company reported second- quarter earnings after the close of the market. Mellanox rose to $66.38 in regular U.S. trading. Its Tel Aviv shares surged 46.8 percent to a record 372.10 shekels, or $92.75, at 10:07 a.m. today. Check Point Software Technologies Ltd. (CHKP) climbed the most in six months. The Bloomberg Israel-US Equity Index (ISRA25BN) of the most- traded Israeli companies in New York rose the most this month.
The third-quarter sales outlook beat expectations by as much as $50 million, according to the mean estimate of 12 analysts surveyed by Bloomberg. Revenue will continue to rise as Mellanox benefits from mounting demand for cloud technology, Mizuho Securities USA Inc. said. The market for cheaper storage solutions is expected to climb to $10.5 billion in 2014 from $3.7 billion last year, according to Gartner Inc. (IT)
“This is a company finding itself in a very unique position where the demand for their technology is increasing at a rapid pace and they have no competition,” Ruben Roy, an analyst at Mizuho, said by phone from New York yesterday. “The management team is executing remarkably well and you have got one of the most interesting niche technologies.”
The Bloomberg Israel-U.S. Index climbed 2.1 percent to 78.63, paring its decline this year to 3.2 percent. Israel’s benchmark TA-25 Index (TA-25) gained 1.9 percent to 1,077.85 in Tel Aviv, trimming the gauge’s retreat to 0.6 percent this year.
Mounting concern that falling growth rates in China, the European debt crisis and a tepid American recovery will result in companies missing sales targets and reducing their outlook has pushed major Israeli technology shares lower, Oppenheimer & Co. said.
Mellanox had declined 19 percent from this year’s high of $76.82 reached on July 5, before yesterday’s trading. Shares of Check Point, the world’s second largest maker of security networks, slumped 22 percent in the second quarter, the worst three-month performance since 2004.
“The general view is that there is a buying opportunity,” Andrew Uerkwitz, an analyst at Oppenheimer said by phone from New York yesterday. “There had been overselling in the last couple of weeks as people were pessimistic.”
Check Point gained 6.9 percent to $48.75 yesterday, its biggest increase since Jan. 17. The company, which reported earnings of 71 cents per share, plans to increase share repurchases by as much as $1 billion over the next two years, according to a statement yesterday. Second-quarter revenue increased 9.3 percent to $328.7 million, about 1 percent below the $331.8 million mean estimate of 25 analysts surveyed by Bloomberg.
Check Point is benefiting from a change in the Israeli tax law this year that allows the company to use its cash flow from earnings to repurchase shares and return value to shareholders, according to Rick Sherlund, an analyst at Nomura Holdings Inc. in New York.
“This will have the effect of reducing the share count at the company and enabling earnings to be spread over a fewer number of shares,” Sherlund said in an e-mail. The move will create an underlying demand for the shares, which “is viewed by investors as a benefit to the stock and a positive for the company,” he wrote.
Mellanox, based in Yokneam Elit, Israel, reported adjusted earnings per share of 99 cents, more than the 73.5-cent mean estimate of 11 analysts. Its sales for the three months ending June 30 more than doubled over the same period last year.
Third-quarter sales will reach $150 million to $155 million, the company said in a conference call with analysts after the market closed. The outlook beat revenue expectation of $104 million.
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