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Semtech Posts Better-Than-Expected Q3 Results

Driven by robust growth across all of its key metrics, Semtech Corporation (SMTC) reported better-than-expected third-quarter results despite the global chip shortage. Shares rose 1.2% on the news, and closed at $86.69 on December 1.

Semtech supplies analog and mixed-signal semiconductors, and advanced algorithms for consumers, enterprise computing, communications, and industrial end markets. Its shares have gained 27.7% over the past year.

Better-Than-Expected Results

Semtech’s earnings jumped 57.4% year-over-year to $0.74 per share, 2 cents higher than analysts’ estimates of $0.72 per share.

Likewise, net sales increased 27% year-over-year to $194.93 million, surpassing analysts’ estimates of $193.21 million. Against the prior-year quarter, all of Semtech’s segments reported robust growth.

The growth in Wireless and Sensing products was driven by strength in LoRa, and Signal Integrity products growth was aided by 10G PON sales.

Management Comments

President and CEO of Semtech, Mohan Maheswaran, said, “We remain pleased by the demand from the IoT and Infrastructure segments led by new record net sales by our LoRa, 10G PON, and broad-based Protection platforms. We expect these secular trends to continue and that our broad customer relationships, diverse markets, and an innovative slate of new product introductions should enable the Company to deliver record FY2022 results, and provide the path to achieve our long-term net sales goal of $1 billion.”

Guidance

Based on the current economic environment and business momentum, Semtech forecasts fourth-quarter net sales to fall in the range of $184 million to $194 million, against the consensus estimate of $187 million.

Meanwhile, Q4 earnings are projected to fall between $0.65 per share and $0.73 per share, in line with the consensus estimate of $0.66 per share.

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Analysts’ Take

In response to Semtech’s quarterly performance, Robert W. Baird analyst Tristan Gerra maintained a Buy rating on the stock with a price target of $90, which implies 3.8% upside potential to current levels.

Gerra said, “While the F4Q revenue guidance was a tad below our expectation, due to smartphones, business overall remains strong and resilient, while gross margin is at a historical high. Importantly, we see a strengthening of Semtech’s fundamentals as the company diversifies into higher-margin markets, ramps new technologies, along with the prospect for LoRA royalties next year, despite the China near-term wildcard.”

With 5 Buys and 1 Hold, the SMTC stock commands a Strong Buy consensus rating. The average Semtech price target of $90.17 implies 4% upside potential to current levels.

Blogger Opinion

TipRanks data shows that financial blogger opinions are 100% Bullish on SMTC, against a sector average of 69%.

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