Stephen Simpson, CFA
Long only, growth at reasonable price, value, research analyst

Cavium Still Navigating Lofty Expectations

As I recently wrote in reference to F5 (NASDAQ:FFIV), growth investors are unforgiving when growth erodes, and Cavium (NASDAQ:CAVM) shares have not done well lately as this chip company's revenue has continued to decelerate ahead of what bulls hope will be significant product ramps. While Xpliant, LiquidIO, and ThunderX could add about $2 billion to Cavium's addressable market relative to 2015, companies like Intel (NASDAQ:INTC) and Avago (NASDAQ:AVGO) are hardly pushovers and the adoption of ARM servers has been disappointing so far.

It takes ambitious growth expectations to support a fair value in the $60s and the company's margin prospects over the next couple of years really don't support a corresponding EV/revenue

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