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Silicon Motion Technology Corporation (SIMO - Free Report) recently reported preliminary third-quarter 2020 results. The company now expects revenues to be 5% above the high-end of the previously guided range of $114-$120 million (mid-point of $117 million) issued on Jul 30.
The revised guidance translates to revenues of $126 million, indicating an increase of 7.7%, considering the mid-point of the prior guidance. Meanwhile, the Zacks Consensus Estimate for revenues is pegged at $117.1 million, representing year over year increase of 5.9%.
This bodes well for the upcoming earnings release, as it hints toward upward estimate revisions and plausible revenue beat. Markedly, Silicon Motion is scheduled to report third-quarter 2020 results on Nov 2, 2020.
The company is one of the leading providers of NAND flash-based controllers for solid-state storage devices or SSDs. Benefits from NAND pricing trends are likely to have led to the elevated preliminary results.
Following the news, Silicon Motion stock gained 6.5% on Oct 7. Notably, Silicon Motion’s NAND peers, including Western Digital (WDC - Free Report) , Intel (INTC - Free Report) and Micron (MU - Free Report) gained 3.6%, 2.5% and 2.3%, respectively, in the intraday trading session on Oct 7.
Margin Update
Silicon Motion now projects non-GAAP gross margin near the mid-point of the previously mentioned 48% to 50%.
However, the company did not provide any update on its non-GAAP operating margin metrics. It previously guided non-GAAP operating margin of 20-22%.
In second-quarter 2020, the company reported non-GAAP gross margin of 50%, which expanded 180 basis points (bps) sequentially. Non-GAAP operating margin expanded 220 bps on a quarter-over-quarter basis to 22.2%.
Noteworthy Factors
Silicon Motion is poised to gain from the robust demand for its SSD Solutions. Solid uptake for eMMC and UFS controllers, courtesy of the growing adoption of embedded memory controllers in smartphones, is aiding growth.
The company anticipates gaining from increased PC sales triggered by online learning and work-from-home wave, owing to the coronavirus crisis. Further, the growing clout of the latest PCIe NVMe SSDs is a positive.
During the second quarter, the company’s PCIe Gen4 SSD controllers raked in new design wins from five NAND flash makers. Further, Silicon Motion’s UFS controller was selected by a notable NAND flash maker. This momentum is likely to have continued in the third quarter.
Further, China’s anticipated economic recovery post lockdown holds promise. Also, positive trends in smartphone embedded storage transitioning from eMMC to UFS controller devices; and shift from HDDs to SSDs across PCs and other client devices bode well.
Additionally, the company’s efforts to reward shareholders through dividend payments despite the coronavirus crisis are expected to instill investor confidence in the stock. Also, Silicon Motion has a trailing four-quarter positive earnings surprise of 14.1%, on average.
Notably, the Zacks Consensus Estimate for earnings has remained unchanged for the past 60 days at 64 cents, indicating year-over-year growth of 7.3%.
Nevertheless, intensifying competition in the USB flash drive controller market and an anticipated dip in smartphone sales, resulting from the coronavirus outbreak, as indicated by the latest IDC data, might have limited third-quarter revenues.
Furthermore, Silicon Motion is facing the brunt of the coronavirus crisis-led production delays and supply-chain constraints along with reduced IT spending. Also, weaker-than-anticipated Shannon SSD sales remain a concern.
Currently, Silicon Motion carries a Zacks Rank #4 (Sell).
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2021.
Image: Bigstock
Silicon Motion's Upbeat Preliminary Q3 Results Lift NAND Peers
Silicon Motion Technology Corporation (SIMO - Free Report) recently reported preliminary third-quarter 2020 results. The company now expects revenues to be 5% above the high-end of the previously guided range of $114-$120 million (mid-point of $117 million) issued on Jul 30.
The revised guidance translates to revenues of $126 million, indicating an increase of 7.7%, considering the mid-point of the prior guidance. Meanwhile, the Zacks Consensus Estimate for revenues is pegged at $117.1 million, representing year over year increase of 5.9%.
This bodes well for the upcoming earnings release, as it hints toward upward estimate revisions and plausible revenue beat. Markedly, Silicon Motion is scheduled to report third-quarter 2020 results on Nov 2, 2020.
The company is one of the leading providers of NAND flash-based controllers for solid-state storage devices or SSDs. Benefits from NAND pricing trends are likely to have led to the elevated preliminary results.
Following the news, Silicon Motion stock gained 6.5% on Oct 7. Notably, Silicon Motion’s NAND peers, including Western Digital (WDC - Free Report) , Intel (INTC - Free Report) and Micron (MU - Free Report) gained 3.6%, 2.5% and 2.3%, respectively, in the intraday trading session on Oct 7.
Margin Update
Silicon Motion now projects non-GAAP gross margin near the mid-point of the previously mentioned 48% to 50%.
However, the company did not provide any update on its non-GAAP operating margin metrics. It previously guided non-GAAP operating margin of 20-22%.
In second-quarter 2020, the company reported non-GAAP gross margin of 50%, which expanded 180 basis points (bps) sequentially. Non-GAAP operating margin expanded 220 bps on a quarter-over-quarter basis to 22.2%.
Noteworthy Factors
Silicon Motion is poised to gain from the robust demand for its SSD Solutions. Solid uptake for eMMC and UFS controllers, courtesy of the growing adoption of embedded memory controllers in smartphones, is aiding growth.
Silicon Motion Technology Corporation Revenue (Quarterly)
Silicon Motion Technology Corporation revenue-quarterly | Silicon Motion Technology Corporation Quote
The company anticipates gaining from increased PC sales triggered by online learning and work-from-home wave, owing to the coronavirus crisis. Further, the growing clout of the latest PCIe NVMe SSDs is a positive.
During the second quarter, the company’s PCIe Gen4 SSD controllers raked in new design wins from five NAND flash makers. Further, Silicon Motion’s UFS controller was selected by a notable NAND flash maker. This momentum is likely to have continued in the third quarter.
Further, China’s anticipated economic recovery post lockdown holds promise. Also, positive trends in smartphone embedded storage transitioning from eMMC to UFS controller devices; and shift from HDDs to SSDs across PCs and other client devices bode well.
Additionally, the company’s efforts to reward shareholders through dividend payments despite the coronavirus crisis are expected to instill investor confidence in the stock. Also, Silicon Motion has a trailing four-quarter positive earnings surprise of 14.1%, on average.
Notably, the Zacks Consensus Estimate for earnings has remained unchanged for the past 60 days at 64 cents, indicating year-over-year growth of 7.3%.
Nevertheless, intensifying competition in the USB flash drive controller market and an anticipated dip in smartphone sales, resulting from the coronavirus outbreak, as indicated by the latest IDC data, might have limited third-quarter revenues.
Furthermore, Silicon Motion is facing the brunt of the coronavirus crisis-led production delays and supply-chain constraints along with reduced IT spending. Also, weaker-than-anticipated Shannon SSD sales remain a concern.
Currently, Silicon Motion carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2021.
Click here for the 6 trades >>