Yet Again, Microchip Maker Semtech (SMTC) Posts Solid Quarterly Sales

Semtech Corp (NASDAQ:SMTC) is soaring this afternoon, with its share price more than 6 percent above yesterday’s closing price of $28.10. After the final bell, the semiconductor manufacturer released its third-quarter 2017 earnings, posting higher-than-anticipated adjusted earnings – and falling slightly short of the consensus estimate when it came to net revenue.

The microchip seller reportedly earned 37 cents per share of its common stock during the three-month period, which ended on October 30. Wall Street analysts, on average, had projected earnings of 36 cents per share. In the third-quarter last year, Semtech posted per-share earnings of just 19 cents.

Net revenue, compared to the year-ago period, grew 18.5 percent to $137.19 million – up from $115.81 million in Q3 2016. Analysts, however, were expecting Semtech to post net sales of $138.50 million.

It should be noted that net revenue during the third-quarter this year was cut by $3.7 million, thanks to stock-based compensation related to a previously announced warrant granted to Comcast (NASDAQ:CMCSA). When the costs associated with the warrant are not included in Semtech’s accounting calculations, net revenue was $140.9 million.

“Q3 of fiscal 2017 was another solid quarter for Semtech. The Company achieved significant year-over-year net sales growth, while growing earnings at an even faster rate for the same period,” said Semtech’s President and Chief Executive Officer, Mohan Maheswaran. “The strength we are experiencing from exciting growth markets that include the Internet of Things, hyper-scale datacenters and mobile devices is expected to continue and contribute to a better than seasonal outlook for our fourth fiscal quarter.”

The company’s third quarter was also its third consecutive quarter of sales and earnings growth.

For the fourth quarter, Semtech expects its net sales will be reported somewhere between $134 million and $142 million. Earnings per diluted share are projected to be in the range of 13 cents to 17 cents.

Following yesterday’s earnings release, analysts at RBC Capital Markets reaffirmed their “Sector Perform” rating on Semtech’s stock. The firm also lifted its 12-month price target from $28.00 to $32.00.

Also after the surge, Oppenheimer upgraded the semiconductor maker’s stock from “Perform” to “Outperform” – with a price target of $36.00.

“Following a couple of transition years, we believe SMTC’s legacy businesses (long-haul, Samsung Smartphone) has stabilized, allowing greenfield optical and LoRa opportunities to drive outsize revenue/earnings growth,” said Oppenheimer analyst Rick Schafer.

The author does not have any positions in the above mentioned companies.

Tim is a contributing analyst for and specializes in equities trading and public offerings. He is a graduate of UCLA and began his career doing capital markets research for a top investment banking software provider.