Semtech Corporation (SMTC) shares jumped 4% in Wednesday’s extended trading session after the company delivered better-than-expected fiscal second-quarter results. It also provided Q3 sales guidance.
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The quarterly beat was attributable to robust global demand for Semtech’s core growth engines in the IoT and Infrastructure segments, primarily driven by the LoRa and Tri-Edge platforms.
Shares of the supplier of analog and mixed-signal semiconductors and advanced algorithms have gained around 17% over the past year. (See Semtech stock charts on TipRanks)
Adjusted earnings of $0.65 per share beat analysts’ expectations of $0.62 per share. The company reported earnings of $0.43 per share in the prior-year period.
Furthermore, net sales jumped 29% year-over-year to $185 million and exceeded consensus estimates of $182.55 million. The increase in revenues reflected a surge in wireless and sensing product group net sales, driven by LoRa, as well as growth in signal integrity product group net sales, driven by record Tri-Edge sales.
On top of this, the adjusted gross margin grew 90 bps year-over-year to 62.7%, aided by the increase of new products.
Looking ahead, the company provided guidance for the third quarter of Fiscal 2022. The company forecasts net sales in the range of $188 – $198 million, while the consensus estimate is pegged at $189 million.
Additionally, adjusted earnings are forecast to be in the range of $0.68 to $0.76 per share, while gross margin is expected to range between 62.8% and 63.8%.
Semtech CEO Mohan Maheswaran commented, “We are confident that we should be able to continue to execute across all our product groups and deliver a record performance in FY2022.”
Ahead of the earnings announcement, Piper Sandler analyst Harsh Kumar reiterated a Buy rating on the stock with a price target of $84 (18.4% upside potential)
Kumar remained confident that Semtech will post “beat and raise” quarterly results. He added that Semtech shares exhibit a “solid risk-reward dynamic,” as they have underperformed year-to-date.
Consensus among analysts is a Strong Buy based on 8 Buys and 1 Hold. The average Semtech price target of $85.50 implies 20.5% upside potential to current levels.
SMTC scores a 9 out of 10 on TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations.
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