Macom Technology Solutions has joined the ranks of chipmakers that have gotten a lift from sales to AI data centers. MTSI stock surged after its September-quarter report this week.
Early Thursday, Macom matched Wall Street's targets for its fiscal fourth quarter ended Sept. 27 and guided above views for the current period.
The Lowell, Mass.-based company earned an adjusted 73 cents a share on sales of $200.7 million in fiscal Q4. On a year-over-year basis, earnings rose 30% while sales climbed 33%.
For its fiscal first quarter ending Jan. 3, Macom expects to earn an adjusted 78 cents a share, up 34% year over year, on sales of $215 million, up 37%. That's based on the midpoint of its guidance.
On Thursday, MTSI stock popped 14.1% to close at 139.14. Earlier in the session, it hit a record high of 140.27.
On the stock market today, MTSI stock declined 0.9% to close at 137.86.
"The data center end market continues to be dynamic with significant growth opportunities," Macom Chief Executive Stephen Daly said on a conference call with analysts Thursday. "We see favorable trends continuing as the internet service providers are accelerating capex to deploy next-generation data centers."
Macom sells high-speed data connectivity systems to AI data center customers.
"New data centers may deploy large number of processors which can require increased optical and/or copper interconnects, and we support these areas with our products," Daly said. "We remain agnostic as to whether customers select electrical or optical solutions."
MTSI Stock Nabs Price-Target Hikes
At least six Wall Street analysts raised their price targets on MTSI stock after the company's earnings report.
Barclays analyst Tom O'Malley reiterated his overweight, or buy, rating on MTSI stock and raised his price target to 160 from 120.
"Data center AI optical deployments continue to drive numbers higher near term" for Macom, O'Malley said in a client note.
Needham analyst Quinn Bolton maintained his buy rating on MTSI stock and upped his price target to 150 from 120.
"We think strength (in Macom's data center sales) is primarily coming from 400G adoption and 800G optical modules," Bolton said in a client note. "Management expects the segment to grow 15% quarter-to-quarter, and 'very strong double-digits' in fiscal 2025, likely the fastest growing end market."
Macom serves three market segments: data centers, telecom, and industrial and defense.
The company's data center sales are set to rise in the current fiscal year thanks to customers shifting to higher-speed connectivity products, Bolton said.
"Macom's market position in 800G and 1.6T is resulting in significant growth opportunities," he said.
Macom Is On IBD 50 List
Elsewhere on Wall Street, Mizuho Securities trading-desk analyst Jordan Klein said the "best trade" among generative artificial intelligence stocks now is in "optics, high-speed interconnect and ethernet."
He cited Arista Networks, Astera Labs, Coherent, Credo, Fabrinet and Lumentum as winners in the category.
MTSI stock is on the prestigious IBD 50 stock list.
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