Mellanox Technologies Ltd. dropped the most since July 2010, closing the gap with the New York-traded shares after Stifel Nicolaus & Co. cut its recommendation on the stock and Intel Corp. reduced its sales forecast.
The maker of technology used to transfer and store data plunged 8.1 percent to 440 shekels, or the equivalent of $110.71, at the close in Tel Aviv. The New York shares closed at $110.85 Sept. 7. Mellanox was the worst performer on the TA-25 benchmark index after leading declines on the Bloomberg Israel-US Equity Index in New York.
Stifel cut its recommendation on Mellanox to hold from buy, saying the Yokneam Elit, Israel-based company may see slower demand for its products. The current price reflects a fair valuation, it said. Intel Corp., the world’s largest semiconductor maker, reduced its third-quarter sales forecast, citing declining demand for personal computers from corporate customers in a weakening economy.
“The big move is because of the compounding effect of the Stifel downgrade and news from Intel,” Brian Freed, an analyst at Wunderlich Securities Inc., said by phone from Denver on Sept. 7. “Intel is a bellwether in the semiconductor industry and you probably have people wanting to trim their exposure in the sector.”
Intel agreed to buy QLogic Corp.’s InfiniBand business for $125 million on Jan. 23 and in April said it will spend $140 million to acquire Cray Inc.’s technology to connect server chips. The California company accounts for 2 percent of Mellanox revenue, according to data compiled by Bloomberg.
Sales in the third quarter will reach $12.9 billion to $13.5 billion, down from a prior forecase of $13.8 billion to $14.8 billion, Intel said in a Sept. 7 statement. Analysts had estimated sales of $14.2 billion on average, according to data compiled by Bloomberg.
Mellanox’s Israeli shares, which reached a record on Sept. 5, have more than tripled this year, surging 255 percent, the biggest jump in the TA-25 Index. The company has a market value of 17.5 billion shekels ($4.4 billion). Mellanox’s reported revenue has beat analysts’ estimates in each quarter since it went public in 2007.
“The current valuation reflects an interesting entry point,” said Jonathan Kreizman, an analyst at Clal Finance Batucha Brokerage Ltd. in Tel Aviv.
Mellanox has benefited from demand for its InfiniBand technology, which is used in high-end computing and data centers.