Semtech SMTC shares have surged 93.8% year to date (YTD), outperforming the broader Zacks Computer and Technology sector’s return of 19.4% and Zacks Semi-Analog & Mixed industry's appreciation of 4%.
This phenomenal share price movement has been driven by solid performance across the Signal Integrity and Analog Mixed Signal & Wireless product lines. Strength in the LoRa technology was a plus.
In the first half of fiscal 2025, net sales were $421.5 million, down 11.3% from the first half of fiscal 2024 due to lower net sales from the industrial end market related to decreased sales volume and pricing pressures. However, net sales from the infrastructure end and high-end consumer end markets increased $27.6 million and $16 million, respectively.
SMTC’s Q3 Guidance Positive
For third-quarter fiscal 2025, SMTC expects net sales to be $233 million (+/- $5 million). The Zacks Consensus Estimate for the same is pegged at $232.59 million, indicating 15.78% growth from the figure reported in the year-ago quarter.
Semtech Corporation Price and Consensus
Semtech Corporation price-consensus-chart | Semtech Corporation Quote
Semtech expects net sales in the infrastructure end market to increase sequentially, driven by strong demand for data center applications. It expects industrial net sales to be slightly up.
The non-GAAP gross margin is expected to be 52% (+/- 50 bps). The non-GAAP operating margin is anticipated to be 17.2% (+/- 80 bps).
The non-GAAP-based earnings are expected to be 23 cents (+/- 3 cents) per share. The consensus mark for earnings is pegged at 24 cents per share.
Strong Partner Base Aids SMTC’s Prospects
The solid performance of SMTC’s product lines is considered a key catalyst in driving its shares, as well as the company’s rich partner base that includes the likes of NVIDIA NVDA, Ericsson ERIC and Nokia NOK.
The partnership with Skylo, a provider of satellite-based services, to integrate Non-Terrestrial Network capabilities into Semtech’s HL series LPWA modules, specifically the HL7810 and HL7812, enabling uninterrupted global connectivity, even in challenging conditions can be a major driver.
Semtech’s collaboration with Console Connect to expand its AirVantage Smart Connectivity service across the Asia-Pacific region, using Console Connect's IMSI service and partner roaming network, might be a plus in the near term.
The partnership with NVIDIA to implement low power, low latency active copper cables or ACCs for Blackwell racks and pods is a major positive in the upcoming quarters.
SMTC will continue with the qualification process with its Tri-Edge and FiberEdge wireless platforms for 5G advanced and are actively engaging with key partners like Ericsson and Nokia.
The growing demand for LoRa devices and LoRaWAN standards is likely to contribute to top-line growth in the near term.
Robust demand for SMTC’s passive optical network products will continue driving revenues in the fiscal third quarter.
Semtech’s recent acquisition of AptoVision, a privately held company that provides algorithms for transporting video over Internet protocol (IP), strengthens its position in the video over IP Pro AV space in the long term.
However, macroeconomic challenges, including persistent inflation and geo-political tensions, remain major concerns.
Zacks Rank and Valuation
Semtech’s shares are overvalued at this moment, as suggested by a Value Score of F.
SMTC stock is currently trading at a forward 12-month Price/Sales of 3.18X compared with the industry’s 7.74X.
SMTC currently carries a Zacks Rank #3 (Hold), implying that investors should wait for a better entry point. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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