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Why Is Semtech (SMTC) Down 15.6% Since Last Earnings Report?
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A month has gone by since the last earnings report for Semtech (SMTC - Free Report) . Shares have lost about 15.6% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Semtech due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Semtech Q2 Earnings & Revenues Surpass Estimates
Semtech Corporation’s fiscal second-quarter 2021 non-GAAP earnings of 43 cents per share surpassed the Zacks Consensus Estimate by a penny. The reported earnings increased 22.9% sequentially and 13.2% year over year.
Non-GAAP revenues of $143.7 million increased 8% sequentially and 5% from the prior-year quarter. The increase was driven by strength in the Signal Integrity products group. Strong growth from the Hyperscale data center and 5G wireless base station markets also aided the growth.
Revenues surpassed the Zacks Consensus Estimate by 1.1%.
Management remains optimistic about the LoRa business amid the COVID-19 pandemic. As LoRa is ideally suited for applications such as contact tracing, distance tracking, hygiene and health monitoring, as well as occupancy management, the company expects to see further growth in the LoRa business.
Its key growth drivers are product differentiation, operational flexibility, and specific focus on fast-growing segments and regions.
Let’s delve into the numbers in detail:
Revenues by End Market
Sales to the infrastructure end market (including enterprise computing and communications end markets) — which represented 47% of its total revenues — increased 18% on a sequential basis and 37% year over year, driven by a strong rebound in PON demand.
However, revenues from the industrial market increased 12% sequentially and represented 31% of total net revenues.
Also, sales to the high-end consumer market represented 22% of total revenues and decreased 11% sequentially. Roughly 14% of high-end consumer revenues were attributed to mobile devices and 8% to other consumer systems.
Revenues by Product Group
Signal Integrity Product Group revenues contributed 50% to total sales. The reported figure increased 20% sequentially and 30% from the prior year. The increase was driven by persistently strong hyperscale data center customer addition and solid demand for 10 gig PON products.
Revenues from its Protection Product Group represented 23% of the total revenues. The figure was down 17% sequentially due to COVID-19-related issues.
Wireless and Sensing Product Group revenues, which contributed 27% to total revenues, increased 18% sequentially. The increase was driven by record net sales of LoRa platform products.
Bookings
Net bookings decreased sequentially but resulted in a book to bill above 1. POS bookings accounted for approximately 21% of shipments during the quarter.
Margins and Net Income
Non-GAAP gross margin was 61.4%, up 50 basis points (bps) sequentially but down 50 bps from the year-ago quarter. The sequential increase was due to a higher mix of infrastructure revenues.
Semtech’s adjusted selling, general and administrative expenses decreased 8.3% year over year to $27.9 million. However, product development and engineering expenses increased 11.7% from the year-ago quarter to $26.1 million.
As a result, its operating margin of 24.2% was up 300 bps sequentially and 130 bps year over year.
Balance Sheet & Cash Flow
Semtech ended the quarter with cash and cash equivalents of $281.5 million versus $268.9 million in the fiscal first quarter. Accounts receivables were $51.7 million, up from $49.5 million in the fiscal first quarter. Long-term debt was $187 million, down from $190.8 million in the fiscal first quarter.
For the quarter, cash flow from operations was $37.2 million, capital expenditure amounted to $7 million and free cash flow totaled $30.2 million.
During the quarter, the company repurchased 233,000 shares for $12.4 million.
Guidance
For fiscal third-quarter 2021, management expects revenues in the range of $145-$155 million.
Non-GAAP gross profit margin is expected within 61-62%. Management projects SG&A expenses within $29-$30 million, and research and development costs in the range of $25-$26 million. Non-GAAP earnings per share are expected in the range of 43-49 cents.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended upward during the past month. The consensus estimate has shifted -12.9% due to these changes.
VGM Scores
Currently, Semtech has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Semtech has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.
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Why Is Semtech (SMTC) Down 15.6% Since Last Earnings Report?
A month has gone by since the last earnings report for Semtech (SMTC - Free Report) . Shares have lost about 15.6% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Semtech due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Semtech Q2 Earnings & Revenues Surpass Estimates
Semtech Corporation’s fiscal second-quarter 2021 non-GAAP earnings of 43 cents per share surpassed the Zacks Consensus Estimate by a penny. The reported earnings increased 22.9% sequentially and 13.2% year over year.
Non-GAAP revenues of $143.7 million increased 8% sequentially and 5% from the prior-year quarter. The increase was driven by strength in the Signal Integrity products group. Strong growth from the Hyperscale data center and 5G wireless base station markets also aided the growth.
Revenues surpassed the Zacks Consensus Estimate by 1.1%.
Management remains optimistic about the LoRa business amid the COVID-19 pandemic. As LoRa is ideally suited for applications such as contact tracing, distance tracking, hygiene and health monitoring, as well as occupancy management, the company expects to see further growth in the LoRa business.
Its key growth drivers are product differentiation, operational flexibility, and specific focus on fast-growing segments and regions.
Let’s delve into the numbers in detail:
Revenues by End Market
Sales to the infrastructure end market (including enterprise computing and communications end markets) — which represented 47% of its total revenues — increased 18% on a sequential basis and 37% year over year, driven by a strong rebound in PON demand.
However, revenues from the industrial market increased 12% sequentially and represented 31% of total net revenues.
Also, sales to the high-end consumer market represented 22% of total revenues and decreased 11% sequentially. Roughly 14% of high-end consumer revenues were attributed to mobile devices and 8% to other consumer systems.
Revenues by Product Group
Signal Integrity Product Group revenues contributed 50% to total sales. The reported figure increased 20% sequentially and 30% from the prior year. The increase was driven by persistently strong hyperscale data center customer addition and solid demand for 10 gig PON products.
Revenues from its Protection Product Group represented 23% of the total revenues. The figure was down 17% sequentially due to COVID-19-related issues.
Wireless and Sensing Product Group revenues, which contributed 27% to total revenues, increased 18% sequentially. The increase was driven by record net sales of LoRa platform products.
Bookings
Net bookings decreased sequentially but resulted in a book to bill above 1. POS bookings accounted for approximately 21% of shipments during the quarter.
Margins and Net Income
Non-GAAP gross margin was 61.4%, up 50 basis points (bps) sequentially but down 50 bps from the year-ago quarter. The sequential increase was due to a higher mix of infrastructure revenues.
Semtech’s adjusted selling, general and administrative expenses decreased 8.3% year over year to $27.9 million. However, product development and engineering expenses increased 11.7% from the year-ago quarter to $26.1 million.
As a result, its operating margin of 24.2% was up 300 bps sequentially and 130 bps year over year.
Balance Sheet & Cash Flow
Semtech ended the quarter with cash and cash equivalents of $281.5 million versus $268.9 million in the fiscal first quarter. Accounts receivables were $51.7 million, up from $49.5 million in the fiscal first quarter. Long-term debt was $187 million, down from $190.8 million in the fiscal first quarter.
For the quarter, cash flow from operations was $37.2 million, capital expenditure amounted to $7 million and free cash flow totaled $30.2 million.
During the quarter, the company repurchased 233,000 shares for $12.4 million.
Guidance
For fiscal third-quarter 2021, management expects revenues in the range of $145-$155 million.
Non-GAAP gross profit margin is expected within 61-62%. Management projects SG&A expenses within $29-$30 million, and research and development costs in the range of $25-$26 million. Non-GAAP earnings per share are expected in the range of 43-49 cents.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended upward during the past month. The consensus estimate has shifted -12.9% due to these changes.
VGM Scores
Currently, Semtech has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Semtech has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.