Valued at $4.8 billion, Semtech Corporation (SMTC) is a global provider of high-performance analog and mixed-signal semiconductors. It offers solutions for a wide range of industries, including the Internet of Things (IoT), data centers, industrial automation, and consumer electronics.
One of the company’s most standout offerings is LoRa, a wireless communication technology. It enables long-range, low-power data transmission, which has become the industry standard for IoT applications. The company's diverse product line and its emphasis on high-margin, niche markets have established it as a formidable competitor in the semiconductor industry. This is probably why the stock is a “Strong Buy” in the analyst community.
Semtech stock has gained an impressive 185% in the year-to-date, compared to the S&P 500 Index's ($SPX) 23.7% gain. Shares are trading roughly 10% below their 52-week high of $70.27, making it a good time to buy shares on the dip.
Semtech Is Turning Around Its Story
Semtech's financial performance has been mixed in recent years, owing to macroeconomic conditions, supply chain challenges, and shifting industry dynamics. However, with a new CEO, the company's fortunes are improving. Dr. Hong Q. Hou, who had previously served on the board of directors, took over as president and CEO in June. Hou has extensive experience in the semiconductor industry and could help Semtech advance to the “next phase of innovation and growth.”
The company reported impressive results for the third quarter of fiscal year 2025, indicating continued strength in key markets and a steady growth trajectory. Hou emphasized Semtech's strategic focus on operational excellence, portfolio rationalization, and strong customer engagement, which have all contributed to the company's strong financial performance.
In Q3, net sales of $236.8 million increased 10% sequentially and 17.8% year-over-year. LoRa-enabled solutions, in particular, generated sales of $29 million, a 104% increase year-over-year.
Gross margin increased to 52.4% from 51.3% a year ago, reflecting improved operational efficiency and a favorable product mix. Adjusted net earnings per share (EPS) of $0.26 were up dramatically from EPS of $0.02 in the third quarter of fiscal 2024.
Semtech ended the quarter with a cash balance of $136.5 million and $1.2 billion in long-term debt. The company is working to reduce its debt, which included making a $5 million principal payment on its credit facility this quarter. Semtech made an additional $10 million principal payment after the quarter ended.
Into the new year, the company sees a growing opportunity to integrate its technology into Nvidia (NVDA) solutions. It is also expanding its PON efforts beyond China, focusing on the U.S. market and collaborating with module manufacturers to enter other global markets. PON enables fast, low-cost, and energy-efficient optical communication networks.
Looking ahead, management expects EPS of $0.32 in the fourth quarter, an improvement over a loss of $0.06 per share in the year-ago quarter. Net sales could rise by 29.6% to $250 million, driven by growth in the data center segment. Management expects the infrastructure end market to be the strongest tailwind in the near future. The industrial segment is also expected to grow, with continued strength in LoRa and cellular IoT solutions.
The company did not provide full-year guidance. However, analysts that cover the stock expect Semtech’s earnings to increase by 454.5% in fiscal 2025, followed by 125.4% growth in fiscal 2026.
SMTC stock is trading at 36 times forward 2026 earnings, compared to its five-year historical average price-to-earnings multiple of 62.7x.
What Does Wall Street Say About Semtech Stock?
Overall, Wall Street analysts are optimistic about semiconductor companies, rating Semtech stock a “Strong Buy.” Out of the 12 analysts who cover SMTC stock, nine have given it a "Strong Buy," while one has a “Moderate Buy” rating, and two rate it a “Hold.”
Based on the mean target price of $70.20, Semtech stock has upside potential of 12% from current levels. Plus, the high target price of $85 suggests that the stock could rise more than 35% over the next 12 months.
The Bottom Line on Semtech Stock
Semtech's strong Q3 results and positive Q4 outlook support the company's ongoing momentum and ability to capitalize on growth opportunities in its infrastructure, industrial, and consumer markets. With a strong portfolio, market share, and strategic investments in AI-driven products and LoRa solutions, Semtech is well-positioned for long-term growth in fiscal year 2025 and beyond, making it an excellent semiconductor stock to buy now.
