Buy Semi-Maker Semtech Shares

Semtech Corporation (SMTC - Analyst Report) is a fabless supplier of analog and mixed signal semiconductor devices. Forward guidance is for a 3-6% revenue increase in the July quarter. With backlog increasing significantly in Q1, we do not expect results to fall short of the guidance. We expect continued revenue growth, as new product platforms gain traction. Thus, we are reiterating our Buy rating on the shares.

Management is focused on infrastructure build-up, better product definition and timely introduction and design-in of new products. New platforms in power management are expected to increase revenue and expand margins in the back half of the fiscal year. Both orders and backlog were up strongly, indicating a revenue pickup despite the macro softness.

Shares of Semtech are currently trading at a 15.8x multiple of price to our current 2009 earnings estimate (P/E). We expect the shares to trade higher within the next six months. Consequently, we are setting a target price of $20 (20.8x P/E) and recommending investors to accumulate shares.

Sejuti Banerjea contributed to the report.

Read the full analyst report on SMTC

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