Semtech Target Upped to $18

Semtech Corp. (SMTC - Analyst Report) is a fabless supplier of analog and mixed-signal semiconductor devices. Management has been diversifying the product portfolio, introducing new high-margin products and broadening the customer base.

January quarter results were short of consensus estimates. Forward guidance is for a -7% to -17% revenue decline in the April quarter. Both revenue growth and margin expansion are expected to return in the second half of fiscal 2009 when the new product platforms gain traction.

We are reiterating our BUY rating on Semtech. We expect the shares to trade higher within the next six months. Consequently, we are raising the target price to $18 (35.3x P/E) and recommending investors to accumulate shares.

Sejuti Banerjea contributed to this report.