Trading Ideas: Semtech Corp. (SMTC)
Semtech Corp. (SMTC) develops mixed signal and analog semiconductors in two distinct market segments: Standard Semiconductor Products; and Rectifier, Assembly, and Other Products.
The company and the stock price have been performing very well, which is all the more impressive considering the troubles the industry has endured. On May 21, SMTC reported first-quarter earnings that exceeded analyst views. It earned 17 cents per share, over 21% better than estimates. Revenues jumped almost 25%
Additionally, management raised its second-quarter guidance to 23-24 cents per share, above the 22-cent consensus. This is one reason that the stock is close to its 52-week high despite turbulence in the industry and the market as a whole. In fact, the stock has enjoyed a smooth ride up from its February lows below $12.
A look at its fundamentals reveals a healthy picture. Its balance sheet carries no debt and it has an ROE above 11%. SMTC’s profit margin is north of 16%, which is solid. Analysts have been lifting their earnings estimates as well. Over the past month, this year’s estimates have increased over 10% to 73 cents per share. Seven of the eight covering analysts have raised their forecasts. We see this stock hitting $22 over the next year.
Suggested Stop: $17
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