2 Stocks To Buy Post-Earnings, 1 To Avoid

Includes: EBAY, FFIV, XLNX
by: Rash Menaria

eBay (NASDAQ:EBAY) - Buy

eBay provides online market place for sale of goods and services. It also provides other online commerce, platforms and payment solutions to businesses and individuals.

eBay reported impressive fourth quarter results with revenues of $3.38 billion (up 35% YoY) and non-GAAP EPS of $0.60 (up 17% YoY) versus the Street estimates of $3.31 billion and $0.57, respectively. eBay’s core retailing business -- marketplace -- seems to be making a turnaround as it revamped the website, invested in new technologies recasting it as an online mall. eBay’s payments unit, PayPal, also performed strongly. The active Paypal accounts increased by 13% YoY and Paypal showed a strong increase of 130 bp in its margins.

Both these businesses, PayPal and marketplace, have more than 100 million active users, and the user base is growing steadily. In addition to strong trends in its PayPal and marketplace businesses, eBay’s new mobile payment systems seems to be making headway along with the robust growth of e-commerce businesses. The mobile payment volume was $4 billion in 2011, five times more than its previous year volume and is estimated to be $7 billion in 2012.

Although, eBay’s guidance for 2012 was mixed, it mainly has to do with conservatism on the part of management, particularly given the eurozone uncertainty. I recommend buying the stock from medium term perspective as turnaround of its core marketplace business continues to attract more and more consumers.

F5 Networks (NASDAQ:FFIV) - Buy

F5 Networks, Inc. is a global networking appliances company. It offers products in various segments of Application Delivery Controller market.

FFIV reported sequential gains and a solid YoY growth. Its revenue of $322.4 million and non-GAAP EPS of $1.03 exceeded the consensus estimates. Revenues grew by 20% YoY. In the hardware based solutions, VIPRION series and TMOS version 11 showed strong sales. In the software business, sales of its software-only virtualizations of the products increased by 149% YoY.

I like F5 Networks despite of weakening spending environment in the technology space. Recent trends indicate that demand for virtualization technologies and cloud computing will continue to be resilient. Further, with new features such as Vcmp and iApps built in, TMOS version 11 gaining traction, and FFIV’s aggressive sales expansion, and new product launches, the company is likely to see a strong tailwind going into the next few quarters.

Xilinx (NASDAQ:XLNX) - Sell

Xilinx Inc. is the world’s leading provider of programmable platforms and programmable logic devices. Its brands include Xilinx, Artix, ISE, Kintex, Spartan, Virtex and Zynq. The company offers its products to equipment manufacturers in markets such as wired and wireless communication, industrial, scientific and medical, aerospace and defense, audio, video and broadcast, consumer, automotive, and data processing.

Xilinx reported a third quarter EPS of $0.47, down by 18% YoY and sales of $511.1 million, down 8% sequentially from the prior quarter. New product sales have declined by 13% QoQ. This is likely due to weak business from large communications customers. Consumer and automotive sales were also weaker driven by declines from audio-video broadcast, consumer and automotive applications.

Although, XLNX’s results were better than consensus estimates, and the stock saw slight upside after that, I recommend selling the stock. XLNX’s present valuation at ~20x forward earnings is approaching its historical peaks. Its guidance for the next quarter is based on strong growth of 28nm and increased activity in the wireless and wireline communication space. However, I believe it will take much longer (second half of 2013) before 28nm contributes meaningfully to the sales growth. Further, there is not much visibility into wireless and wireline communications market and decreasing communication infrastructure spending by China Telcos is a big concern.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.