Technology Stocks

Semtech Corporation (NASDAQ:SMTC) Gets Into Gear Off the Data

Semtech Corporation (NASDAQ:SMTC) just announced that it topped Q3 expectations for EPS by $0.02. Revs rose +15.5% year/year to arrive in-line with consensus as the company achieved record results in its Wireless and Sensing and Signal Integrity Product groups and expects record performances from its LoRa technology platform next quarter and its overall financial performance for the year thanks to growth in markets including IoT, mobile, and data centers, and despite headwinds from broader industry weakness.

We also saw several positive analyst reactions, including a target raise to $61 (from $58) at B. Riley FBR.

Semtech Corporation (NASDAQ:SMTC) trumpets itself as a company that designs, develops, manufactures, and markets analog and mixed-signal semiconductor products and advanced algorithms.

The company provides signal integrity products, including a portfolio of optical data communications and video transport products used in various enterprise computing, industrial, communications, and high-end consumer applications; and a portfolio of integrated circuits for data centers, enterprise networks, passive optical networks, wireless base station optical transceivers, and high-speed interface applications.

It also offers protection products, such as filter and termination devices that are integrated with the transient voltage suppressor devices, which protect electronic systems from voltage spikes; and wireless and sensing products comprising a portfolio of specialized radio frequency products used in various industrial, medical, and communications applications, as well as specialized sensing products used in industrial and consumer applications.

In addition, the company provides power products consisting of switching voltage regulators, combination switching and linear regulators, smart regulators, isolated switches, and wireless charging that control, alter, regulate, and condition the power within electronic systems; and discrete semiconductor products, including rectifiers, assemblies, and other products for use in industrial, military, medical, and automotive applications, as well as aerospace and defense systems, such as satellite communications. It serves original equipment manufacturers and their suppliers in the enterprise computing, communications, and consumer and industrial end-markets.

The company sells its products directly, as well as through independent sales representative firms and independent distributors in the United States, Europe, and Asia. Semtech Corporation was incorporated in 1960 and is headquartered in Camarillo, California.

SMTC has responded well, rallying about 19% over the past five days, with this news clearly driving the action. Shares of the stock have powered higher over the past month, rallying roughly 13% in that time on strong overall action.

Mohan Maheswaran, Semtech’s President and Chief Executive Officer, stated: “We delivered strong results including new quarterly records for net sales, operating profit and non-GAAP EPS, led by record results from our Wireless and Sensing and Signal Integrity Product groups. While we are experiencing headwinds from the mobile market and some broad industry weakness, we do expect another record performance from our LoRa technology platforms in our fiscal fourth quarter and anticipate a record financial performance for fiscal year 2019, driven by growth from the IoT, mobile and data center markets.”


Notes from the sell side:

  • Riley FBR raises their SMTC tgt to $61 from $58. F3Q19 results of $173.6M (+6.3%)/$0.63 modestly surpassed their at-Street estimate, helped by record Wireless Sensing (LoRA) and Signal Integrity segment sales. F4Q19 mid-point guidance of $160.0M (-7.8%)/$0.55 was fractionally below Street estimates, but above their recently reduced estimates. They adjust their estimates moderately higher on continued belief in longer-term segment product roadmaps, market share gain, and SAM penetration, with longer-term financial targets attainable in CY21/CY22.
  • Needham notes SMTC reported solid F3Q19 results driven by strength in Wireless & Sensing and Signal Integrity, but F4Q19 guidance fell short due to weakness in the smartphone and legacy businesses.While the LoRa business remains on track to meet FY19 deployment milestones, FY19 LoRa revenue is now tracking at the low end of the $80MM-$100MM range. Protection sales grew 15% Q/Q in F3Q19, but are expected to see a stronger than seasonal Q/Q decline in F4Q19 due to widespread smartphone weakness. They maintain their Hold rating and lower their F4Q19 and FY20 revenue and EPS ests modestly to reflect a slightly lower LoRa growth rate and weak smartphone shipments in FY20. While SMTC’s valuation is beginning to look more attractive at these levels, they remain cautious in the near term due to recent industry weakness.

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