On Thursday, B.Riley increased its price target on Semtech Corp . (NASDAQ: NASDAQ:SMTC (NASDAQ:SMTX)) to $58 from the previous $50, while keeping a Buy rating on the stock. Semtech's first-quarter earnings for fiscal year 2025, reported after the market close on June 4, surpassed consensus estimates. Although the second-quarter guidance was mixed, with slightly higher sales but a bit lower earnings per share, it matched B.Riley's projections.
Semtech's shares showed a strong positive reaction in after-hours trading, indicating a 6% rise. This comes on the heels of an already impressive 74% year-to-date increase, outperforming the semiconductor index by approximately threefold. The company's growth prospects appear to be strengthening, driven by demand in AI Data Centers, broader Data Center segments, and High-End Consumer markets. Additionally, Semtech is on schedule with a significant program ramp in active copper cable AI, expected to contribute to substantial multi-year year-over-year growth.
The firm's operational execution has been highlighted as a key strength, contributing to higher gross margins and effectively managed operating expenses. These factors have had a positive impact on cash flow and are anticipated to support future financial leverage. B.Riley's confidence in Semtech's execution has led to a rise in their fiscal year 2025 and 2026 earnings per share estimates by 3-6%.
In summary, B.Riley's revised price target reflects a belief in the increasing visibility of quarter-over-quarter growth for Semtech, which could potentially accelerate in fiscal year 2026. The firm also notes that strategic options could serve as a leverage for debt reduction and value creation in the medium to long term. The new price target implies a 44% upside and is supported by a forward two-year price-to-earnings ratio of 24.7 times, which is considered reasonable for entry points.
In other recent news, Semtech Corporation has reported robust earnings and revenue results. The company's first-quarter earnings per share (EPS) reached $0.06, surpassing the estimated $0.02, while revenue hit $206.1 million, outperforming the anticipated $195.28 million. Following these strong results, both Susquehanna and Needham have raised their price targets for Semtech to $55 and $50 respectively, maintaining a positive rating on the company's stock.
Semtech's outlook has been significantly buoyed by the strength in Data Center sales, which have seen a considerable increase, particularly for hyperscale applications. The company also anticipates revenue generation from its Analog Chip Converter (ACC) at the end of 2024, with a more notable increase expected in 2025.
In other developments, Semtech expects moderate sales for its Passive Optical Network (PON) products, despite strong demand. The company has also reported sequential growth in bookings for Internet of Things (IoT) systems. Looking ahead, Semtech has projected an EPS of $0.09 and a revenue forecast of $212 million for the second quarter of fiscal year 2025.
InvestingPro Insights
Recent data from InvestingPro provides additional context to Semtech Corp.'s (NASDAQ: SMTC) financial landscape. The company's market capitalization stands at a robust $2.5 billion, reflecting investor confidence in its market position. Despite not having turned a profit over the last twelve months, analysts have revised their earnings upwards for the upcoming period, which aligns with B.Riley's positive outlook and suggests a pivot towards profitability. Semtech's revenue growth is also noteworthy, with an increase of 14.83% over the last twelve months as of Q4 2024, and a quarterly uptick of 15.18% in Q4 2024, indicating sustained growth momentum.
InvestingPro Tips highlight the stock's volatility but also underscore strong returns over the last year, with a 75.1% one-year price total return and a significant 131.62% increase over the last six months. These figures suggest that Semtech has been a rewarding investment for shareholders in the recent past. Additionally, the company's liquid assets have been noted to exceed short-term obligations, which could provide financial flexibility in the near term.
For those looking to delve deeper into Semtech's financial health and prospects, InvestingPro offers a range of additional tips. By using the coupon code PRONEWS24, readers can get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, providing access to even more expert analysis and data to inform investment decisions. There are currently 9 additional InvestingPro Tips available for Semtech, which can be found at: https://www.investing.com/pro/SMTC.
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