Press Release: Semtech Announces Third Quarter Of Fiscal Year 2025 Conference Call

For Immediate Release

Chicago, IL – November 8, 2024 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: NVIDIA Corp. NVDA, Taiwan Semiconductor Manufacturing Company Ltd. TSM and Semtech Corp. SMTC.

Here are highlights from Thursday’s Analyst Blog:

AI Optimism Driving Semiconductor Sales: 3 Stocks with Room to Run

The global semiconductor industry is witnessing a strong recovery phase after sales suffered in 2023. The rebound is being fueled by advancements in artificial intelligence (AI) technologies, data processing, and a resurgence in electronics manufacturing, which are driving market demand.

Also, the semiconductor industry, which is part of the broader technology sector, is poised to grow further as the Fed goes for more rate cuts. Given the promising future, investing in semiconductor stocks like NVIDIA Corp., Taiwan Semiconductor Manufacturing Company Ltd. and Semtech Corp. should be a wise decision. Each of these stocks carries a Zacks Rank #1 (Strong Buy) or 2 (Buy) or #3 (Hold). You can see the complete list of today's Zacks #1 Rank stocks here.

Semiconductor Sales Soar

The Semiconductor Industry Association (SIA) said on Tuesday that global semiconductor sales totaled $166 billion in the third quarter, up 23.3% year over year and 10.7% sequentially.

Month over month, semiconductor sales jumped 4.1% in September, totaling $55.3 billion.

SIA President and CEO John Neuffer said, "The global semiconductor market continued to grow during the third quarter of 2024, with quarter-to-quarter sales increasing at the largest rate since 2016," adding, "Sales in September reached the market's highest-ever monthly total, driven by a 46.3% year-to-year increase in the Americas."

The ongoing enthusiasm surrounding AI, especially generative AI, is driving demand for semiconductors. The robust performance by tech that has been responsible for this year's broader market rally is largely fueled by NVIDIA, which has emerged as a market leader in the generative AI space, sparking a wave of interest and progress in this area.

Semiconductor Stocks to Benefit from AI Enthusiasm

Experts believe AI has significant untapped potential, with much more to be explored. The soaring enthusiasm is expected to drive further demand as more semiconductor manufacturers enter the AI market.

AI-specific chips have become crucial as their applications grow across various industries, from high-performance computing to everyday consumer devices. Also, memory components like NAND flash and DRAM have been witnessing a rebound in demand, meeting more specialized computing needs and supporting AI-heavy tasks.

According to Gartner, global semiconductor revenues are projected to hit $630 billion in 2024, increasing 19% year over year. NAND flash, which is key in AI systems, is expected to see a solid 12% jump in revenues by 2025, driven in part by continued supply shortage and growing demand for AI applications.

The Federal Reserve cut interest rates by 50 basis points in September, the first since March 2020. The current benchmark policy rate is in the range of 4.75-5%, the lowest level since April 2023. Market participants now are expecting the Fed to cut interest rates by 25 basis points today at the end of its November policy meeting. Lower interest rates generally benefit growth assets by reducing the opportunity cost of holding non-yielding assets, such as technology and semiconductor stocks.

3 Semiconductor Stocks Poised to Grow

NVIDIA Corporation

NVIDIA Corporationis the worldwide leader in visual computing technologies and the inventor of the graphic processing unit, or GPU. Over the years, NVDA's focus has evolved from PC graphics to AI-based solutions that now support high-performance computing, gaming and virtual reality platforms.

NVIDIA Corporation's expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for current-year earnings improved 0.7% over the past 60 days. NVDA presently has a Zacks Rank #2.

Taiwan Semiconductor Manufacturing Company Limited

Taiwan Semiconductor Manufacturing Company Limited is the world's largest dedicated integrated circuit foundry. As a foundry, TSM manufactures ICs for its customers based on their proprietary IC designs using its advanced production processes. Taiwan Semiconductor Manufacturing Company Limited's goal is to establish itself as one of the world's leading semiconductor companies by building upon the strengths that have made it the world's leading IC foundry.

Taiwan Semiconductor Manufacturing Company Limited's expected earnings growth rate for the current year is 28%. The Zacks Consensus Estimate for current-year earnings has improved 2.8% over the past 60 days. TSM presently carries a Zacks Rank #2.

Semtech Corporation

Semtech Corporation designs, manufactures and markets a wide range of analog and mixed-signal semiconductors for commercial applications. SMTC's product line comprises Signal Integrity Products, Protection Products, Power and High-Reliability Products, Wireless and Sensing Products, and Systems Innovation Group.

Semtech's expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for current-year earnings improved 6.3% over the past 90 days. SMTC presently carries a Zacks Rank #3.

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.

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The global semiconductor industry is witnessing a strong recovery phase after sales suffered in 2023. The rebound is being fueled by advancements in artificial intelligence (AI) technologies, data processing, and a resurgence in electronics manufacturing, which are driving market demand.

Also, the semiconductor industry, which is part of the broader technology sector, is poised to grow further as the Fed goes for more rate cuts. Given the promising future, investing in semiconductor stocks like NVIDIA Corporation NVDA, Taiwan Semiconductor Manufacturing Company Limited TSM and Semtech Corporation SMTC should be a wise decision. Each of these stocks carries a Zacks Rank #1 (Strong Buy) or 2 (Buy) or #3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.

Semiconductor Sales Soar

The Semiconductor Industry Association (SIA) said on Tuesday that global semiconductor sales totaled $166 billion in the third quarter, up 23.3% year over year and 10.7% sequentially.

Month over month, semiconductor sales jumped 4.1% in September, totaling $55.3 billion.

SIA President and CEO John Neuffer said, “The global semiconductor market continued to grow during the third quarter of 2024, with quarter-to-quarter sales increasing at the largest rate since 2016,” adding, “Sales in September reached the market’s highest-ever monthly total, driven by a 46.3% year-to-year increase in the Americas.”

The ongoing enthusiasm surrounding AI, especially generative AI, is driving demand for semiconductors. The robust performance by tech that has been responsible for this year’s broader market rally is largely fueled by NVIDIA, which has emerged as a market leader in the generative AI space, sparking a wave of interest and progress in this area.

Semiconductor Stocks to Benefit from AI Enthusiasm

Experts believe AI has significant untapped potential, with much more to be explored. The soaring enthusiasm is expected to drive further demand as more semiconductor manufacturers enter the AI market.

AI-specific chips have become crucial as their applications grow across various industries, from high-performance computing to everyday consumer devices. Also, memory components like NAND flash and DRAM have been witnessing a rebound in demand, meeting more specialized computing needs and supporting AI-heavy tasks.

According to Gartner, global semiconductor revenues are projected to hit $630 billion in 2024, increasing 19% year over year. NAND flash, which is key in AI systems, is expected to see a solid 12% jump in revenues by 2025, driven in part by continued supply shortage and growing demand for AI applications.

The Federal Reserve cut interest rates by 50 basis points in September, the first since March 2020. The current benchmark policy rate is in the range of 4.75-5%, the lowest level since April 2023. Market participants now are expecting the Fed to cut interest rates by 25 basis points today at the end of its November policy meeting. Lower interest rates generally benefit growth assets by reducing the opportunity cost of holding non-yielding assets, such as technology and semiconductor stocks.

4 Semiconductor Stocks Poised to Grow

NVIDIA Corporation

NVIDIA Corporation is the worldwide leader in visual computing technologies and the inventor of the graphic processing unit, or GPU. Over the years, NVDA’s focus has evolved from PC graphics to AI-based solutions that now support high-performance computing, gaming and virtual reality platforms.

NVIDIA Corporation’s expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for current-year earnings improved 0.7% over the past 60 days. NVDA presently has a Zacks Rank #2.

M/A-Com (MTSI) came out with quarterly earnings of $0.73 per share, in line with the Zacks Consensus Estimate. This compares to earnings of $0.56 per share a year ago. These figures are adjusted for non-recurring items.

A quarter ago, it was expected that this chipmaker would post earnings of $0.66 per share when it actually produced earnings of $0.66, delivering no surprise.

Over the last four quarters, the company has surpassed consensus EPS estimates two times.

M/A-Com, which belongs to the Zacks Semiconductor - Analog and Mixed industry, posted revenues of $200.71 million for the quarter ended September 2024, surpassing the Zacks Consensus Estimate by 0.23%. This compares to year-ago revenues of $150.38 million. The company has topped consensus revenue estimates four times over the last four quarters.

The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call.

M/A-Com shares have added about 31.2% since the beginning of the year versus the S&P 500's gain of 24.3%.

What's Next for M/A-Com?

While M/A-Com has outperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock?

There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately.

Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions.

Ahead of this earnings release, the estimate revisions trend for M/A-Com: mixed. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #3 (Hold) for the stock. So, the shares are expected to perform in line with the market in the near future. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

It will be interesting to see how estimates for the coming quarters and current fiscal year change in the days ahead. The current consensus EPS estimate is $0.74 on $203.09 million in revenues for the coming quarter and $3.24 on $855.01 million in revenues for the current fiscal year.

Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Semiconductor - Analog and Mixed is currently in the bottom 33% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.

Another stock from the same industry, Semtech (SMTC), has yet to report results for the quarter ended October 2024.

This chipmaker is expected to post quarterly earnings of $0.24 per share in its upcoming report, which represents a year-over-year change of +1100%. The consensus EPS estimate for the quarter has remained unchanged over the last 30 days.

Semtech's revenues are expected to be $232.59 million, up 15.8% from the year-ago quarter.

Zacks Investment Research

Silicon Laboratories (SLAB) came out with a quarterly loss of $0.13 per share versus the Zacks Consensus Estimate of a loss of $0.21. This compares to earnings of $0.62 per share a year ago. These figures are adjusted for non-recurring items.

This quarterly report represents an earnings surprise of 38.10%. A quarter ago, it was expected that this chipmaker would post a loss of $0.64 per share when it actually produced a loss of $0.56, delivering a surprise of 12.50%.

Over the last four quarters, the company has surpassed consensus EPS estimates four times.

Silicon Labs, which belongs to the Zacks Semiconductor - Analog and Mixed industry, posted revenues of $166.4 million for the quarter ended September 2024, surpassing the Zacks Consensus Estimate by 0.52%. This compares to year-ago revenues of $203.76 million. The company has topped consensus revenue estimates four times over the last four quarters.

The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call.

Silicon Labs shares have lost about 19.7% since the beginning of the year versus the S&P 500's gain of 20.1%.

What's Next for Silicon Labs?

While Silicon Labs has underperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock?

There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately.

Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions.

Ahead of this earnings release, the estimate revisions trend for Silicon Labs: mixed. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #3 (Hold) for the stock. So, the shares are expected to perform in line with the market in the near future. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

It will be interesting to see how estimates for the coming quarters and current fiscal year change in the days ahead. The current consensus EPS estimate is $0.11 on $186.64 million in revenues for the coming quarter and -$1.57 on $603.92 million in revenues for the current fiscal year.

Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Semiconductor - Analog and Mixed is currently in the bottom 40% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.

Semtech (SMTC), another stock in the same industry, has yet to report results for the quarter ended October 2024.

This chipmaker is expected to post quarterly earnings of $0.24 per share in its upcoming report, which represents a year-over-year change of +1100%. The consensus EPS estimate for the quarter has remained unchanged over the last 30 days.

Semtech's revenues are expected to be $232.59 million, up 15.8% from the year-ago quarter.

Zacks Investment Research

As artificial intelligence (AI) continues its meteoric rise, the demand for faster, smarter, and more integrated infrastructure is reaching critical levels. Companies focused on data-centric connectivity solutions, high-speed data infrastructure, and advanced semiconductor and IoT technologies are at the forefront, providing the backbone for AI’s explosive growth.

Last week, research firm Needham attended the Open Compute Project Summit, and came away bullish on semiconductors and AI. Analyst N. Quinn Bolton identified semiconductor companies helping drive advancements in the industry, particularly in areas critical to AI and high-speed data infrastructure.

Within that niche, Astera Labs, Inc. , Credo Technology Group , and Semtech Corporation all have a “Buy” rating from Bolton, with each stock showing a double-digit growth potential as their innovations align with the accelerating AI trend reshaping industries worldwide.

AI Growth Stock #1: Astera Labs

Santa Clara-based Astera Labs, Inc. , incorporated in 2017, has carved out a niche in the world of data-centric systems. As a fabless semiconductor company, Astera is all about cutting-edge connectivity solutions. Its lineup of integrated circuits (ICs), boards, and services is designed to eliminate performance bottlenecks, especially in compute-heavy environments.

By partnering with top-tier processor vendors, cloud giants, and manufacturing powerhouses, Astera Labs helps enterprises stay ahead of the curve, ensuring smooth, lightning-fast PCIe (peripheral component interconnect express) connectivity.

Valued at a market cap of $10.95 billion, the semiconductor connectivity innovator made its public trading debut on March 20, and since then, the stock has risen 13.3%. The stock surged nearly 35% over the first three trading sessions, hitting an all-time intraday high of $95.21 by March 26. But like many Wall Street newcomers, ALAB faced early turbulence, dipping to a low of $36.22 by Aug. 7.

That low, however, marked a turning point, and ALAB has more than doubled since then.

Astera Labs reported solid fiscal Q2 earnings results on Aug. 6, sailing past Wall Street’s forecasts. Its total revenue rose a whopping 619% year over year and 18% sequentially to $76.9 million, beating estimates by about 6%. Its adjusted EPS climbed to $0.13 from a loss per share of $0.14, topping the analyst consensus by 19%.

ALAB ended Q2 with an adjusted gross margin of 78% and an operating income of $18.7 million. The company’s cash and cash equivalents amounted to $421.1 million, compared with $45.1 million as of Dec. 31, 2023.

Astera Labs' CEO, Jitendra Mohan is expecting even stronger gains as new AI platforms ramp up production. With AI adoption accelerating and design wins piling up, Mohan is confident Astera will outpace industry growth thanks to its deep collaborations with hyperscalers and innovative AI platform providers.

As the company gears up to release fiscal Q3 earnings results after the close on Nov. 4, management forecasts revenue between $95 million and $100 million, with non-GAAP gross margin projected to be approximately 75% and non-GAAP EPS estimated to land between $0.16 and $0.17.

Analysts tracking Astera Labs predict a GAAP loss of $0.54 per share in fiscal 2024 but foresee a bright horizon ahead, forecasting a profit of $0.08 in 2025 as the script flips.

Needham analyst Bolton is bullish on Astera Labs, upping the stock’s price target to $80 from $65. He notes the considerable traffic at the company’s booth at last week’s event, reflecting excitement over the newly launched Scorpio fabric switch family. The P-Series switch family, featuring 4-port, 64-lane PCIe Gen 6/5 switches, is particularly tailored for AI head node applications.

Bolton anticipates that the P-Series will achieve a one-to-one attachment rate with each Nvidia Blackwell GPU in servers, potentially boosting opportunities by two to four times. As the X-Series details are set to unfold soon, Astera’s momentum appears strong.

ALAB stock has a consensus “Strong Buy” rating overall. Among the 11 analysts covering the stock, nine suggest a “Strong Buy,” one advises a “Moderate Buy,” and the remaining one analyst maintains a “Hold.”

The mean price target for ALAB is $71.36, a discount to current levels. The Street-high target price of $85 implies that the stock could rally as much as 13.9%.

AI Growth #2: Credo Technology Group

Founded in 2008 and based in Grand Cayman, Credo Technology Group Holding Ltd has become a key player in high-speed connectivity. The company delivers cutting-edge solutions for optical and electrical Ethernet applications worldwide.

Boasting a market cap of $6.4 billion, Credo’s innovative product lineup includes HiWire active cables, SerDes chiplets, and low-power line card PHYs. Serving hyperscalers, OEMs, and the enterprise market, Credo’s technology drives faster, more efficient data flow, helping power the future of global digital communication with seamless precision.

Shares of the semiconductor technology provider rallied 179% over the past 52 weeks, with an impressive 33.2% jump this past month alone. In fact, CRDO hit its all-time high of $40.37 last week on Oct. 14.

Credo unveiled its fiscal Q1 2025 earnings results on Sept. 4, showcasing impressive revenue of $59.7 million, which exceeded Wall Street's estimates with a staggering 70% year-over-year growth. This surge was primarily driven by a remarkable 79.3% increase in total product revenue, which accounted for nearly 90.2% of the company’s top-line figure.

Adjusted EPS stood at $0.04, marking a significant turnaround from the previous year's adjusted loss of $0.03, although it fell slightly short of expectations. The company closed Q1 on a strong note, reporting a robust cash and short-term investment balance of $398.6 million.

CEO Bill Brennan said that customers' AI infrastructure deployments are the key drivers of both current and anticipated growth. Brennan said, “Going forward in fiscal 2025 and beyond, we expect contributions from our entire suite of innovative, power and cost-efficient, high-speed connectivity solutions.”

For fiscal Q2, management estimates revenue between $65 million and $68 million, while the non-GAAP gross margin is anticipated to be slightly higher, between 62% and 64%.

Over the longer term, analysts tracking Credo expect the company’s GAAP loss to shrink a notable 87.5% annually to $0.02 per share in fiscal 2025. In fiscal 2026, Credo is projected to turn the tide, with a GAAP profit of $0.37 per share.

Analyst Bolton is bullish on CRDO, raising his price target to $43 from $33 following the Open Compute Project Summit. He highlighted strong demand for Credo’s AEC cables, particularly from Amazon , while noting that conditions remain stable with other hyperscalers like Microsoft .

Bolton believes that Amazon's revenue is set to reaccelerate in the latter half of 2025, alongside a robust recovery for Microsoft and an expected ramp from Credo’s third hyperscaler customer. Alongside optimism over Credo’s entry into the PCIe retimer market, Bolton’s outlook for the company is bright.

Overall, Wall Street is upbeat, with a consensus “Strong Buy” rating. Among the nine analysts covering the stock, seven suggest a “Strong Buy,” one recommends a “Moderate Buy,” and one backs a “Moderate Sell.”

Although the stock currently trades above the mean price target of $37.11, the Street-high target of $45 suggests the stock could rally as much as 14.6%.

AI Growth Stock #3: Semtech Corporation

Semtech Corporation , incorporated in 1960, designs, develops, manufactures, and markets analog and mixed-signal semiconductors and advanced algorithms. The California-based firm designs high-speed data communication products that power data centers, enterprise networks, and optical infrastructures.

With a rich portfolio spanning IoT modules, video-over-IP technology, and advanced voltage protection, Semtech enables the seamless flow of data across industries. By blending cutting-edge engineering with precision algorithms, it helps shape modern connectivity, delivering solutions that span from industrial applications to medical technology, serving clients globally across North America, Europe, and Asia-Pacific. Its market cap currently stands at $2.85 billion.

Over the past 52 weeks, SMTC has rallied 200%, including a recent sprint of 58.7% in just the past three months. The stock reached a new two-year high of $49.53 on Sept. 26.

SMTC stock rallied over 11% on Aug. 28 after its fiscal Q2 earnings report exceeded expectations. Semtech reported revenues of $215.4 million - lower than $238.4 million in the year-ago quarter, but still beating projections. Adjusted EPS dipped by 15.4% year over year to $0.11, and also surpassed consensus estimates. The company’s adjusted gross margin came in at 50.4%.

Key to Semtech’s success is its focus on the industrial and communications sectors, particularly its LoRa (Long Range) technology - a vital player in the expanding Internet of Things (IoT) market. LoRa’s low-power, long-range communication capabilities are finding growing use across smart utilities, healthcare, factory automation, and even automotive facilities.

As Semtech continues to expand its IoT portfolio, the company’s management sees significant revenue growth ahead. With LoRa consumption rising, infrastructure remains a strong short-term tailwind. For Q3, the management projects sales to increase to $233 million (plus or minus $5 million), while EPS is estimated to be around $0.23 per share.

Analysts project Semtech to reduce its losses by 80% year over year to $0.07 per share in fiscal 2025, paving the way for a return to a profit of $0.78 per share in fiscal 2026.

Analyst Bolton has a $50 price target on SMTC, hinting at 9.3% potential upside. As per the analyst, Semtech is anticipated to benefit from Nvidia's increased usage of copper (HGZ24).

SMTC has a consensus “Strong Buy” rating overall. Of the 12 analysts in coverage, nine recommend a “Strong Buy,” one suggests a “Moderate Buy,” and the remaining two have a “Hold.”

The average analyst price target for SMTC is $52.60, indicating a potential upside of 14.9%. The Street-high target price of $61 implies a 33.2% upside potential.

On the date of publication, Sristi Suman Jayaswal did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.