Craig-Hallum bullish on Semtech, initiates with a Buy

As previously reported, Craig-Hallum initiated coverage of Semtech (SMTC) with a Buy rating and $35 price target. The firm sees the company as a great way to play the growing IoT space with its recent acquisition of Sierra Wireless (SWIR). The stock has performed poorly since the acquisition as investors grew concerned about the debt levels to purchase Sierra Wireless and Semtech core legacy business has suffered especially in China. Craig-Hallum believes there are substantial cost cuts in the offing as Semtech opex is well above industry peers. The firm also expects new CEO Paul Pickle will likely move quickly after starting June 30th and is well known for his cost-cutting abilities. Further, it thinks patient investors will be rewarded as Semtech legacy business picks up late this year and into next year. In a normal economic environment and post further cost cuts,the firm thinks Semtech could earn over $4 in earnings per share in 2026.