Semiconductor supplier, Semtech, experienced a significant boost in its stock value following a surprising adjusted profit in its fiscal third quarter. Shares saw double-digit gains, rising 21% to $20.27, marking the company's best performance since March 17, 2020, based on Dow Jones Market Data.
Strong Numbers Beat Expectations
Despite Wall Street's forecast of a loss of 15 cents per share, Semtech reported adjusted earnings of two cents per share, beating expectations. Additionally, net sales of $200.9 million exceeded estimates of $200.5 million.
Weak Guidance Overshadowed by Good Results
Although the fourth-quarter guidance provided by Semtech was weaker than expected, it did not stem the surge in stock value. The company projected net sales of $190 million plus or minus $10 million, falling short of analysts' forecast of $207.5 million. Additionally, Semtech anticipated an adjusted diluted loss per share of five cents plus or minus six cents, while analysts had predicted a loss of seven cents.
Investors Not Surprised by Semtech's Success
Investors who have been following Semtech closely over the past year were not caught off guard by the strong stock performance on Thursday. After experiencing a 21% decline following the release of fiscal fourth-quarter numbers on March 29, the company's shares rebounded the following day by 4.9% and 10% after the announcement of its fiscal first- and second-quarter data, respectively.
Semtech's Financial Performance Impacted by Macro Challenges
Semtech's financial performance continues to be impacted by macro challenges, although there are signs of slight improvement. According to Benchmark analyst Cody Acree, the company is taking focused actions to realign its operations and position itself for strong earnings growth in the future. Acree highlighted that while fourth-quarter guidance remains cautiously reserved, Semtech is addressing concerns by focusing on cost control and operational enhancements. Benchmark rates the company's shares at Buy with a price target of $30.
SMTC in Prove-It Mode, say Oppenheimer Analysts
Oppenheimer analysts led by Rick Schafer, who rate Semtech's shares at Perform, share a similar viewpoint. They see the company in prove-it mode as the extended turnaround and integration efforts start to take root, according to a Thursday note.
Majority of Analysts Bullish on Semtech
An overwhelming majority of analysts have a bullish outlook on Semtech's stock, with 91% rating shares at Buy, according to FactSet. However, despite a jump in share price on Thursday, Semtech's shares for the year remain 29% lower. In comparison, Analog Devices is up 12%, Texas Instruments is down 4.6%, and ON Semiconductor is 21% higher.
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