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 (LON:NETW) (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.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.