Semtech Outperforming As The Pieces Come Together

With stronger than expected results in industrial, handsets, data center, and optical, the pieces of Semtech’s (SMTC) growth story have come together a lot quicker than I’d expected. Add in some operating margin leverage and the shares are up about 15% in just the last three months (and up close to 60% over the last year), handily outperforming the SOX index and peers/rivals like Maxim (MXIM), MACOM (MTSI), Inphi (IPHI), and ON Semiconductor (ON) over those time periods.

I didn’t expect this level of outperformance so soon from Semtech, but I can see why the Street is bullish on the prospects for the second half of the year, given the company’s leverage to data center and optical, as well as improving trends for handsets and the ongoing growth opportunity in Long Range Access (or LoRa). I’m not completely comfortable paying more than 5x forward revenue for Semtech today, those margins are improving and this is shaping up as a relatively rare double-digit revenue growth story with M&A support.

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Semtech Outperforming As The Pieces Come Together