Core Viewpoint - Semtech Corporation's stock has seen a nearly 9% increase due to renewed optimism from U.S.-China trade talks, although it remains down 33% year-to-date in 2025 [2] Financial Performance - Semtech's quarterly revenues rose 30.1% to $251 million from $193 million a year prior, compared to a 4.8% growth for the S&P 500 [6] - The company's revenue has increased at an average rate of 7.2% over the past three years, outpacing the S&P 500's 5.5% growth [7] - Semtech's revenues expanded 4.7% from $869 million to $909 million in the last 12 months, again against a 5.5% rise for the S&P 500 [7] Profitability Metrics - Semtech's operating income over the last four quarters was $62 million, reflecting a poor operating margin of 6.9%, compared to 13.2% for the S&P 500 [8] - The company's net income was -$162 million, resulting in a net income margin of -17.8%, significantly lower than the S&P 500's 11.6% [8] Valuation Comparison - Semtech has a price-to-sales (P/S) ratio of 3.4, higher than the S&P 500's 3.0 [7] - The price-to-free cash flow (P/FCF) ratio for Semtech is 52.6, compared to 20.5 for the S&P 500 [7] Financial Stability - Semtech's debt stood at $558 million, with a market capitalization of $3.4 billion, resulting in a moderate debt-to-equity ratio of 18.3% [9] - Cash and cash equivalents amount to $164 million of the total $1.4 billion in assets, giving a cash-to-assets ratio of 11.6% [9] Downturn Resilience - Semtech's stock has experienced more severe declines than the S&P 500 during recent downturns, including an 85.4% drop from its peak in 2021 [11] - The stock's performance during past crises indicates a neutral resilience to downturns [14]

Industry Overview - The semiconductor industry is projected to grow from $631.01 billion in 2025 to $958.93 billion by 2030, with a CAGR of 8.73% during this period, driven by demand for AI and data center technologies [2] - Shipment volume in the semiconductor market is expected to increase from 1.40 trillion units in 2025 to 2.29 trillion units by 2030, at a CAGR of 10.32% [3] AMD Insights - AMD's data center revenues surged 57.2% year over year to $3.674 billion in Q1 2025, accounting for 49.4% of total revenues, driven by the adoption of EPYC processors [4] - The launch of the AMD EPYC 4005 Series processors in May 2025 is aimed at enhancing performance and efficiency for small and medium businesses [6] - AMD's partnerships with major hyperscalers like Oracle and Google Cloud have expanded the use of its EPYC CPUs, contributing to its growth [5] Semtech Insights - Semtech's data center revenues reached a record $51.6 million in Q1 fiscal 2026, up 143% year over year, driven by demand for CopperEdge and FiberEdge products [7] - The launch of the CopperEdge portfolio in April 2025 includes solutions that enable 800G and 1.6T connectivity for AI/ML data centers, focusing on power savings and performance [8] - Semtech has strengthened collaborations with cloud service providers, enhancing its position in next-generation data center infrastructure [9] Performance and Valuation - Year-to-date, AMD shares have decreased by 2.8%, while SMTC shares have fallen by 38.5%, attributed to a challenging macroeconomic environment [11] - Both AMD and SMTC shares are currently considered overvalued, with AMD trading at a forward Price/Sales ratio of 5.65X and SMTC at 3.09X [14] - The Zacks Consensus Estimate for AMD's 2025 earnings is $4.02 per share, reflecting a 21.45% year-over-year increase, while SMTC's fiscal 2026 earnings estimate is $1.66 per share, indicating an 88.64% year-over-year increase [16] Earnings Performance - AMD has consistently beaten earnings estimates over the past four quarters, with an average surprise of 2.30%, while SMTC has a higher average surprise of 10.83% [17] - Semtech's stronger earnings surprise history and innovative solutions position it as a more attractive investment compared to AMD [18]

Group 1 - Moretus Research provides high-quality equity research focused on U.S. public markets, aiming to deliver clarity, conviction, and alpha for serious investors [1] - The research framework identifies companies with durable business models, mispriced cash flow potential, and intelligent capital allocation, emphasizing a structured and repeatable approach [1] - Valuation methods are based on sector-relevant multiples tailored to each company's business model and capital structure, prioritizing comparability, simplicity, and relevance [1] Group 2 - Research coverage focuses on underappreciated companies experiencing structural changes or temporary dislocations, where disciplined analysis can yield asymmetric returns [1] - Moretus Research aims to elevate the standard for independent investment research by providing professional-grade insights and actionable valuation [1]

Company Overview - Semtech Corporation (NASDAQ: SMTC) is a provider of high-performance semiconductors, IoT systems, and cloud connectivity services [1] Recent Performance - The stock was poised to return to prices not seen since early 2022 but faced a significant decline in February following an announcement [1]

Semtech (SMTC) could be a solid choice for investors given its recent upgrade to a Zacks Rank #2 (Buy). This upgrade primarily reflects an upward trend in earnings estimates, which is one of the most powerful forces impacting stock prices.The sole determinant of the Zacks rating is a company's changing earnings picture. The Zacks Consensus Estimate -- the consensus of EPS estimates from the sell-side analysts covering the stock -- for the current and following years is tracked by the system.Individual inves ...

Shares of Semtech (SMTC) have gained 9.4% over the past four weeks to close the last trading session at $37.33, but there could still be a solid upside left in the stock if short-term price targets of Wall Street analysts are any indication. Going by the price targets, the mean estimate of $56.33 indicates a potential upside of 50.9%.The average comprises 12 short-term price targets ranging from a low of $43 to a high of $68, with a standard deviation of $8.32. While the lowest estimate indicates an increas ...

Cash and Liquidity - As of April 27, 2025, the company's foreign subsidiaries held $136.1 million in cash and cash equivalents, a decrease from $139.1 million at January 26, 2025[181]. - The company expects future non-operating cash uses to be for capital expenditures and debt repayment, funded through cash flows from operating activities[183]. - On April 24, 2025, the company increased its total available borrowing capacity under the revolving credit facility by $117.5 million, raising the total facility size to $455.0 million[185]. - As of April 27, 2025, the company had $171.2 million outstanding under the Term Loans and no revolving loans outstanding, with available undrawn borrowing capacity of $452.1 million[187]. - The company issued $250.0 million in aggregate principal amount of 2028 Notes on October 26, 2023, bearing interest at 4.00% per year, maturing on November 1, 2028[194]. - As of April 27, 2025, approximately $62.0 million of the 2028 Notes remained outstanding, with one condition for conversion met[195]. - The company is in compliance with the financial covenants in its Credit Agreement as of April 27, 2025[190]. - There have been no material changes to cash requirements from those disclosed in the Annual Report for the fiscal year ended January 26, 2025[203]. Operating Performance - In the first three months of fiscal year 2026, net cash provided by operating activities was $27,824 thousand, a significant increase compared to a net cash used of $89 thousand in the same period of fiscal year 2025[204]. - Operating cash flows were positively impacted by a 21.8% increase in net sales, lower interest payments, and reduced restructuring payments, while negatively impacted by increased annual bonus payments and higher inventory spending[206]. - Capital expenditures for the first three months of fiscal year 2026 were $1.7 million, up from $1.3 million in the same period of fiscal year 2025, reflecting investments in production capabilities[208]. - The company sold investments for proceeds of $0.5 million in the first three months of fiscal year 2026, compared to $2.7 million in the same period of fiscal year 2025[208]. - In the first three months of fiscal year 2026, the company made a prepayment of $10.0 million on its Term Loans, with no such prepayments made in the same period of fiscal year 2025[211]. - Employee share-based compensation payroll taxes paid in the first three months of fiscal year 2026 amounted to $8.9 million, compared to $2.4 million in the same period of fiscal year 2025[212]. Strategic Initiatives - The company is conducting a portfolio rationalization review to identify non-core assets and align its portfolio with its strategic vision[199]. - The stock repurchase program was expanded by an additional $350.0 million on March 11, 2021, allowing the company to repurchase its common stock at any time[200]. - The remaining authorization for share repurchase under the program as of April 27, 2025, was $209.4 million[201]. - Working capital fluctuates based on end-market demand and management of receivables, inventory, and payables, with potential acquisitions also impacting requirements[202]. - The company plans to finance significant expenditures for new product development through cash generated by operating activities and existing cash balances[198].

Core Viewpoint - Semtech Corp reported strong first-quarter results, but its shares declined by 5.8% despite positive earnings and revenue growth [1][8]. Financial Performance - Semtech's revenues reached $251.1 million, exceeding consensus estimates of $250.1 million, with earnings per share at 38 cents, above the expected 37 cents [4]. - The company experienced a year-on-year revenue increase of 22%, with Data Center sales soaring by 143% [6]. - Gross margins improved to 53.5%, slightly above the projected 53.0% [4]. Segment Performance - The Infrastructure segment saw a sequential sales growth of 5% and a year-on-year increase of 30%, totaling $72.8 million [2]. - Data Center sales contributed significantly, growing 3% sequentially and 143% year-on-year to $51.6 million [2]. Profitability and Guidance - Non-GAAP operating margins are expected to expand from 16.4% in fiscal 2025 to 20.2% in fiscal 2027 [3]. - Management provided guidance for earnings of 40 cents per share on revenues of $256 million, slightly above market expectations [5]. - The company anticipates sequential growth in its infrastructure and consumer segments, with industrial sales expected to remain flat or slightly decline [5]. Analyst Ratings and Price Targets - Analysts have maintained positive ratings, with Stifel raising its price target from $42 to $45, and Piper Sandler maintaining a target of $55 [9]. - Roth Capital Partners reaffirmed a Buy rating with a price target of $65, while Cantor Fitzgerald set a target of $54 [9].

Core Viewpoint - Semtech Corporation (SMTC) reported strong first-quarter fiscal 2026 earnings, with non-GAAP earnings of 38 cents per share matching the Zacks Consensus Estimate and revenues of $251.1 million exceeding expectations, indicating robust growth across all end markets, particularly in data centers [1][3][10]. Financial Performance - Non-GAAP earnings of 38 cents per share showed a significant improvement from 6 cents in the year-ago quarter, exceeding management's guidance of 37 cents [1][2]. - Revenues of $251.1 million surpassed the Zacks Consensus Estimate by 0.44% and increased by 22% year over year [3][10]. - Non-GAAP gross margin expanded to 53.5%, up 370 basis points year over year, while non-GAAP operating income surged 88.9% to $47.6 million [7]. Revenue Breakdown - Infrastructure market sales reached $72.8 million, accounting for 29% of net sales, with a year-over-year growth of 30% driven by data center demand [4]. - Industrial market sales were $142.8 million, representing 56.9% of net sales, up 24% year over year [4]. - High-end consumer market sales totaled $35.4 million, a 3% increase year over year, supported by strong design-in momentum for SurgeSwitch [5]. Product Line Performance - Signal Integrity sales were $73.5 million, up 26.1% year over year, making up 29.3% of net sales [6]. - Analog Mixed Signal & Wireless sales reached $90.6 million, a 20.3% increase year over year, accounting for 36.1% of net sales [6]. - IoT System and Connectivity sales were $86.9 million, reflecting a 19.9% year-over-year growth, comprising 34.6% of net sales [6]. Future Guidance - For Q2, Semtech expects net sales of $256 million (+/- $5 million), indicating a year-over-year rise of 18.5% [10]. - The company anticipates non-GAAP earnings of 40 cents (+/- 3 cents) per share, representing a year-over-year increase of 254.6% [12]. - Non-GAAP gross margin is expected to be around 53% (+/- 50 bps) for the upcoming quarter [11].

Group 1: Earnings Performance - Semtech reported quarterly earnings of $0.38 per share, matching the Zacks Consensus Estimate, and showing a significant increase from $0.06 per share a year ago [1] - The company had previously exceeded earnings expectations, posting $0.40 per share against an expected $0.32, resulting in a 25% surprise [1] - Over the last four quarters, Semtech has surpassed consensus EPS estimates three times [1] Group 2: Revenue Performance - Semtech's revenues for the quarter ended April 2025 were $251.1 million, exceeding the Zacks Consensus Estimate by 0.52% and up from $206.1 million year-over-year [2] - The company has also topped consensus revenue estimates in all four of the last quarters [2] Group 3: Stock Performance and Outlook - Semtech shares have declined approximately 39.7% since the beginning of the year, contrasting with the S&P 500's decline of only 1.3% [3] - The future performance of Semtech's stock will largely depend on management's commentary during the earnings call and the company's earnings outlook [3][4] - Current consensus EPS estimate for the upcoming quarter is $0.39 on revenues of $255.28 million, and for the current fiscal year, it is $1.70 on revenues of $1.05 billion [7] Group 4: Industry Context - The Semiconductor - Analog and Mixed industry, to which Semtech belongs, is currently ranked in the top 36% of over 250 Zacks industries, indicating a favorable industry outlook [8] - Research indicates that the top 50% of Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1 [8]