On Thursday, Piper Sandler maintained a positive outlook on Semtech Corp . (NASDAQ:SMTC (NASDAQ:SMTX)), reiterating an Overweight rating with a $60.00 price target. Semtech's recent financial results for the April quarter surpassed expectations, and although the guidance for July presented a mixed picture, the firm expressed a particularly optimistic stance on the company's prospects in the data center sector.
The company's active copper cables (ACC) and other data center opportunities were highlighted as strong points, as Semtech's offerings are currently in the qualification phases with major computing providers. Management anticipates that the revenue surge from these design wins will materialize in fiscal year 2026, with a potential serviceable available market (SAM) of approximately $100 million for ACC alone.
Despite the possibility of Semtech capturing 50% of this market, Piper Sandler views the ACC opportunity as a significant incremental business for the company. Additionally, management indicated that channel inventories are returning to normal levels after being actively managed down during the April quarter and preceding periods.
The firm's continued constructive stance is bolstered by the belief that there are multiple avenues for Semtech to benefit in the near-term, as indicated by the company's management and recent performance.
In other recent news, Semtech Corporation has experienced a series of positive developments. The company's first-quarter earnings per share (EPS) and revenue for fiscal year 2025 surpassed expectations, with an EPS of $0.06 and revenue of $206.1 million. Analyst firms B.Riley, Susquehanna, Needham, and Roth/MKM have all raised their price targets for Semtech following these results.
Semtech's growth prospects are strengthening, driven by demand in AI Data Centers, broader Data Center segments, and High-End Consumer markets. Semtech's operational execution has also been highlighted as a key strength, contributing to higher gross margins and effectively managed operating expenses.
Analyst firms have expressed confidence in Semtech's future, with B.Riley raising their fiscal year 2025 and 2026 earnings per share estimates by 3-6%. Semtech's second-quarter guidance for fiscal year 2025 projects an EPS of $0.09 and a revenue forecast of $212 million. These recent developments highlight Semtech's strong performance and positive market outlook.
InvestingPro Insights
Piper Sandler's upbeat assessment of Semtech Corp. (NASDAQ:SMTC) aligns with some of the positive signals reflected in recent data and analyst actions. According to InvestingPro insights, seven analysts have recently revised their earnings estimates upwards for the upcoming period, suggesting a growing confidence in the company's financial outlook. Moreover, Semtech has been experiencing strong price performance with a notable 65.87% return over the last three months and an impressive 131.62% over the past six months.
While the company has not been profitable over the last twelve months, analysts are predicting profitability this year, which could be a pivotal turn for Semtech. Additionally, the company's liquid assets exceed its short-term obligations, providing financial stability and the ability to invest in growth opportunities such as those in the data center sector highlighted by Piper Sandler.
InvestingPro Tips indicate that Semtech's stock price movements have been quite volatile, which may be a consideration for investors looking for stability. However, with a strong return over the last year and no dividend payouts, Semtech may appeal to growth-focused investors. For those interested in deeper analysis, there are additional InvestingPro Tips available, offering insights that could help in making a more informed investment decision. Don't forget to use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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