Xilinx's Stock Surges After Goldman Sachs Upgrades To Buy

Xilinx Inc.'s stock surged 2.1% in morning trade Monday, after the semiconductor maker was upgraded at Goldman Sachs, which cited expectations of a rebound of sales into the communications market. Analyst James Covello raised his rating to buy, after being at neutral for about 15 months. He raised his stock price target to $50, which is 17% above current levels, from $40. Covello said chip shipments into communications markets have been much less than usual levels, which suggests supplies are "lean." When chips were undershipped at the current rate in the past, sales bounced back sharply in the following year, he said. "We have always held the view that supply is more important than demand in driving semiconductor company fundamentals," Covellos wrote in a note to clients. He said recent market share gains are expected to continue, and aerospace and defense revenue should swing to a tailwind from a headwind in 2016. Xilinx's stock has lost 8.2% over the past three months, while the PHLX Semiconductor Index has dropped 13% and the S&P 500 has shed 6.7%.