Thursday, August 9, 2018

High-Flying Silicon Labs Gets Dinged As IoT Growth Hits A Lull

There are quite a few companies out there that would be more than happy to have a business where a slowdown to 11% year-over-year growth could be considered a lull, but then not many companies have enjoyed the sort of multiples and general growth enthusiasm as Silicon Labs (NASDAQ:SLAB). Although Silicon Lab’s multi-year track record relative to the SOX is still good, that gap has closed recently, and competitors like Integrated Device Technology (NASDAQ:IDTI) and Cypress Semiconductor Corp. (NASDAQ:CY) have pulled ahead on a one-year and year-to-date basis.

Silicon Labs is another one of those cases where I have liked the company for some time and been less comfortable with the valuation. I don’t think this slowdown in IoT revenue growth is an early sign of trouble to come, but I do think that high valuations carry high expectations, and Silicon Labs may have to deal with disappointed growth investors swapping out the shares for other semiconductor growth stories (like IDTI). Not yet at a buyable level for me, I suppose Silicon Labs’ current valuation is reasonable for a growth leader, but the reaction to second-quarter earnings underlines the risk of paying high multiples for high-growth stories.

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High-Flying Silicon Labs Gets Dinged As IoT Growth Hits A Lull

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