Silicon Labs Well-Placed For Long-Term Growth, But The Short-Term Could Get Rocky

With both fundamentals and sentiment in and around the semiconductor sector noticeably cooling, valuations are getting more reasonable and attractive on a long-term basis, but the correction process still has some distance to go. In an environment where GDP growth seems likely to slow, Silicon Labs (SLAB) could well be looking at a period where the improvements in the business go largely unrewarded by the market until institutional investors feel comfortable moving back into semiconductor growth stories.

I didn’t think Silicon Labs was attractively priced for a “buy” back in August, and the shares are down another 20% or so since then (slightly underperforming the SOX). I still don’t consider today’s price a slam dunk, but I do believe the company is making progress and becoming better-positioned for future growth in multiple end-markets. A price in the low $70’s would be more interesting to me, but I’m hesitant to dive into chip stocks today given the prospect for worsening outlooks for autos and industrial markets and the risk of at least another round or two (if not more) of cuts to expectations.

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Silicon Labs Well-Placed For Long-Term Growth, But The Short-Term Could Get Rocky