MaxLinear, Inc.: 5G Stock on the Verge of a Breakout?

This 5G stock Could Be Special

To most people, MaxLinear, Inc. (NYSE:MXL) probably isn’t a familiar name. But for 5G stock investors, MXL stock is a ticker that simply cannot be ignored at the moment.

One of the reasons MaxLinear stock isn’t well known is that the company doesn’t serve the consumer market directly. Headquartered in Carlsbad, CA, the company provides radio frequency (RF), analog, digital and mixed-signal integrated circuits for connectivity and access; wired and wireless infrastructure; and industrial and multimarket applications.

The company is on its way to capitalizing on a major growth opportunity.

MaxLinear estimates that its wireless serviceable available market (SAM)—which is made up of wireless access, wireless backhaul, and optical fronthaul—was $658.0 million in 2019. Thanks to the 5G build-out, that number is expected to increase to $856.0 million in 2021 and then reach $1.2 billion in 2023. (Source: “MaxLinear Investor Presentation: May 2021,” MaxLinear, Inc., last accessed July 9, 2021.)

5G deployment is a multi-year process, and based on MaxLinear’s projections, the bulk of the potential for its wireless segment is yet to be realized. Nevertheless, the company has already been churning out impressive growth rates.

Just take a look at MaxLinear’s latest earnings report and you’ll see what I mean.

In the first quarter of 2021, the company generated $209.4 million of net revenue, representing a staggering 238% increase year-over-year. Its gross margin was 53.4%, a sizable expansion from the 49.6% reported for the year-ago period. (Source: “MaxLinear, Inc. Announces First Quarter 2021 Financial Results,” MaxLinear, Inc., April 28, 2021.)

Notably, the company’s revenue from the wireless infrastructure market nearly doubled quarter-over-quarter, due to strong recovering wireless backhaul deployments and the anticipated initial product revenue shipments from its massive multiple-input and multiple-output (MIMO) RF transceiver system on a chip (SOC).

In the company’s April earnings conference call, MaxLinear’s chief executive officer, Kishore Seendripu, said the following:

Our current wireless infrastructure bookings momentum supports continued growth throughout the year. In 5G access, we also announced a partnership with Facebook on the Evenstar program to develop an integrated [Open Radio Access Network (OpenRAN)] SOC which incorporates our state of the art 5G RF transceiver, digital predistortion algorithm and OpenRAN functionality.

(Source: “MaxLinear, Inc. (MXL) CEO Kishore Seendripu on Q1 2021 Results – Earnings Call Transcript,” Seeking Alpha, April 28, 2021.)

The 5G tailwind should drive continued growth for MaxLinear. The company is yet to report its second-quarter results, but the projection implies some serious year-over-year improvements.

In particular, management expects the company to generate $200.0 to $210.0 million in revenue and achieve a gross margin of 52.5% to 54.5% for the second quarter of 2021. To put that in perspective, the company reported $65.2 million of revenue and a gross margin of 50.2% in the second quarter of 2020.

Last but certainly not least, let’s look at the MXL stock chart.

MaxLinear, Inc. (NYSE:MXL) Stock Chart

Chart courtesy of StockCharts.com

Like its peers, MaxLinear stock tumbled during the market crash in March 2020. Afterward, it made a solid recovery and quickly surged past its pre-pandemic level.

For most of 2021, though, MXL stock has been in a trading range rather than continuing its upward momentum. Most recently—as shown in the above chart—MaxLinear stock has climbed to the top of that trading range. If the stock is able to break above the resistance level around $44.00, we could see some fireworks.

Analyst Take

Given the emerging industries that are going to be made possible by 5G, MaxLinear, Inc.’s semiconductor business may not seem that exciting.

However, the company is growing at a commendable pace, and a recent technical pattern in the MXL stock chart suggests that this 5G stock could be on the verge of a breakout.