On Tuesday, Xilinx Inc. (NASDAQ:XLNX) shares edged lower by 1.6% after Advanced Micro Devices Inc. (NASDAQ:AMD) CEO reiterated that the companies were closer to finalising the acquisition of the San Jose CA-based semiconductor manufacturer. AMD announced the $35 billion all-stock deal in April this year.
When the acquisition is complete, it will result in $135 billion worth of the combined enterprise value, making it one of the largest players in the semiconductor industry. Xilinx is the number one provider of adaptive computing solutions and will yield accretive benefits to AMD including margins, earnings and cash flows.
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Xilinx shares have rallied more than 75% since the acquisition was announced on the 7th of April.
Is it too late to buy Xilinx shares?
From a valuation perspective, the rally has pushed Xilinx trailing 12-month and forward P/E ratios to 72.63 and 57.00, respectively, making it too expensive for bargain hunters.
However, analysts expect its earnings to grow at an average annual rate of 18.83% for the next five years, thus making it a more lucrative opportunity.
Therefore, the stock could still gain before the acquisition closes later in the year.
Technically, Xilinx shares seem to be trading within an ascending channel formation in the intraday chart. As a result, it has rallied deep into overbought conditions, creating an opportunity for a pullback.
Investors could target extended pullbacks at about $217.25, or lower at $201.74, while $240.35 and $252.62 are resistance levels.
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