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Semtech (SMTC) Price Target Raised 46.2% by Needham Analyst

By Don Francis, Editor
April 3, 2024 8:05 AM UTC
Semtech (SMTC) Price Target Raised 46.2% by Needham Analyst

Needham's Quinn Bolton raised their price target on Semtech (NASDAQ: SMTC) by 46.2% from $26 to $38 on April 1, 2024. The analyst maintained their Buy rating on the stock, citing several factors contributing to their positive outlook. Bolton highlighted the impact of managerial changes and expectations of improved expense discipline that began in September 2023. Additionally, Bolton pointed to the expansion of the Active Copper Cable (ACC) use-case in GPU back-end networks, which is expected to accelerate Semtech's cyclical recovery in the Data Center segment. The analyst also emphasized the encouraging bookings and point-of-sale data, with both metrics showing growth across all three end markets.

Semtech recently reported its financial results for the fourth quarter of 2024. The company experienced a loss per share of $0.06, missing the Zacks Consensus Estimate of $(0.05) and representing a 112.8% decline compared to the same period in 2023. However, revenues came in at $192.95M, surpassing the Zacks Consensus Estimate by 0.89% and reflecting a 15.2% increase year-over-year. Despite the decline in gross margin and operating income, Semtech's revenue for the full fiscal year 2024 reached $868.8M, marking a 14.8% growth compared to the previous year.

Looking ahead, management provided guidance for the first quarter of 2025. They anticipate an EPS ranging from $(0.04) to $0.04, with revenues projected to be between $195M and $205M. Semtech expects a gross margin of 49.5% and operating expenses in the range of $77M to $80M. The projected operating income is estimated to be between $17.5M and $23.5M, with an operating margin of 10.3%. Additionally, the company forecasts EBITDA in the range of $24.8M to $30.8M.

Semtech's President and CEO, Paul H. Pickle, expressed optimism regarding the company's semiconductor business, stating that the end market demand has progressed from stable to growing. While acknowledging constraints in the hardware business, Pickle believes Semtech is well-positioned to benefit from near-term growth trends, particularly in the infrastructure end market. The company's Executive Vice President and CFO, Mark Lin, highlighted positive operating and free cash flows for the fourth quarter, attributing them to working capital improvements. Lin also mentioned the implementation of a single Enterprise Resource Planning (ERP) system at the beginning of Q1 2025, which is expected to enhance efficiencies and internal controls.

In addition to Needham's Quinn Bolton, other analysts also updated their ratings and price targets for Semtech on April 1, 2024. Craig-Hallum's Anthony Stoss raised their price target by 20% to $36 and maintained a Buy rating on the stock. Stifel Nicolaus's Tore Svanberg increased their price target by 19.2% to $31 and maintained a Strong Buy rating. Baird's Craig Ellis raised the price target by 25% to $50, also maintaining a Buy rating.

The consensus among top-rated analysts is overwhelmingly positive, with 100% of them rating SMTC as either a Strong Buy or Buy. No analysts consider it a Hold, and none recommend or strongly recommend selling the stock.

From SMTC's latest quarterly report on March 28, 2024, the stock price has seen a 2.5% increase. Comparing year-over-year performance, the stock has risen by 24.7%. However, during this period, Semtech's performance has slightly trailed the S&P 500, which has seen a 26.2% increase.

Needham analyst Quinn Bolton has an impressive track record and is ranked in the top 1% of Wall Street analysts by WallStreetZen. With an average return of 27.6% and a win rate of 62.3%, Bolton specializes in the Industrials, Technology, and Consumer Cyclical sectors.

Semtech Corporation is a leading provider of analog and mixed-signal semiconductor products and advanced algorithms. The company offers a wide range of signal integrity products, including optical data communications and video transport products used in various infrastructure and industrial applications. Semtech's portfolio also includes integrated circuits for data centers, enterprise networks, passive optical networks, wireless base station optical transceivers, and high-speed interface applications. In addition, the company provides protection products, wireless and sensing products, and power products that regulate and condition power within electronic systems.

Semtech serves original equipment manufacturers and their suppliers across the enterprise computing, communications, and consumer and industrial markets. The company sells its products directly and through independent sales representative firms and distributors worldwide. Semtech, incorporated in 1960, is headquartered in Camarillo, California.

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