On Wednesday, Semtech Corp . (NASDAQ:SMTC (NASDAQ:SMTX)) saw its stock price target increased to $61 from $58 by a B.Riley analyst, who also maintained a Buy rating on the stock. The adjustment came after the company's second-quarter fiscal year 2025 (F2Q25) results and third-quarter guidance (F3Q25) surpassed consensus expectations.
The company demonstrated solid sales and earnings per share (EPS), along with high-quality margins, spending, and adjusted earnings before interest, taxes, depreciation, and amortization (AEBITDA) compared to what was anticipated. The report highlighted Semtech's performance under new CEO Hong Hou, noting the stock's significant year-to-date increase of 69%, which is roughly 2.7 times higher than the semiconductor index (SOX), despite a two-year 85% decline.
After the market closed on Tuesday, the stock was indicated to rise an additional 6%. The analyst underscored the company's continued growth recovery, driven by AI Data Center advancements, strong seasonal demand in high-end consumer markets, and a rebound in LoRa technology.
The analysis also pointed to effective expense management and the company's strategy to pay down debt without impacting EPS, with potential for further debt reduction. The possibility of strategic carve-outs was mentioned as a way to decrease debt and increase equity value when the timing is right. These factors contribute to the belief that quarter-over-quarter growth will become more visible and could accelerate in fiscal year 2026.
With increased confidence in execution, the analyst has raised the forecast for Semtech's EPS for fiscal years 2025 and 2026 by 3-6%, and has also provided an initial forecast for fiscal year 2027 with healthy year-over-year sales and EPS growth. The new price target represents a 49% upside and is based on a 23.3 times forward two-year price-to-earnings (P/E) ratio, which is seen as an attractive entry point for investors.
In other recent news, Semtech Corporation has been maintaining a strong financial performance with significant revenue growth. The company's Q2 FY 2025 sales reached $215.4 million, marking a 4.5% quarter-over-quarter increase, and non-GAAP earnings per share were reported at $0.11, surpassing Stifel's estimate.
Semtech's guidance for the upcoming third quarter suggests growth in infrastructure, high-end consumer markets, and the industrial sector.
The company's LoRa technology, recognized for its cost savings, has seen a 37% sequential increase in revenues. Semtech's Active Copper Cable (ACC) solution for AI datacenters is anticipated to be a major growth driver, with the potential revenue per customer node surpassing $100 million. The firm is also preparing to start shipments for a market of 30 million units of its industry-leading Linear Pluggable Optics (LPO) in the latter half of FY 2026.
Craig-Hallum maintains a Buy rating on Semtech shares with a $48 target, while Stifel recently raised the target price to $50, both firms highlighting the company's strong standing in data center and AI-based applications. These are recent developments indicating Semtech's strategic focus on revenue acceleration and its commitment to capitalize on market opportunities.
InvestingPro Insights
As Semtech Corp. (NASDAQ:SMTC) impresses with its recent financial performance, the insights from InvestingPro provide a deeper understanding of the company's current market position. The latest data indicates a Market Cap of approximately $2.86 billion, reflecting the company's substantial size within the technology sector. Despite not being profitable over the last twelve months, analysts predict the company will turn a profit this year, which could be a pivotal moment for investors watching the company's trajectory.
InvestingPro Tips highlight the company's strong liquidity position, with liquid assets surpassing short-term obligations—a reassuring sign for stakeholders concerned about financial stability. Moreover, Semtech has experienced a strong return over the last month, with a notable price uptick of 85.96% over the last six months, demonstrating a robust recovery in investor confidence. It is important to note that the company does not pay a dividend, which may influence investment decisions for those seeking regular income from their investments.
For those considering a deeper dive into Semtech's financials and future prospects, InvestingPro offers a range of additional tips, with 7 more available at: InvestingPro. This exclusive content could provide valuable insights for making informed investment decisions.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.