Silicon Labs Executing On Its IoT Opportunity, With Infrastructure Likely To Get Better In 2020

Maybe valuation does matter, at least a little. When I last wrote about Silicon Labs (SLAB) I wrote that I’d at least somewhat thrown in the towel on valuation where this stock was concerned – investors prize the company for its focus on IoT and likely for its M&A takeout as well – but the shares have since underperformed the broader semiconductor space by about 10%. Then again, it could just be a reallocation of some resources in the sector, with other chip companies stumbling (if not crawling) toward the end of their correction cycle and investors wanting to establish positions for the broader recovery.

Whatever the case may be, the shares are still richly-valued, even on a hybrid EV/sales approach that factors in a takeout premium (based upon what companies like Infineon (OTCQX:IFNNY), NXP Semiconductors (NXPI), and ON Semiconductor (ON) have paid for wireless assets). I do believe Silicon Labs is still well-placed for above-average growth, particularly when the timing business recovers and as opportunities in auto mature, but paying premium prices for growth is not really my favored investment strategy.

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Silicon Labs Executing On Its IoT Opportunity, With Infrastructure Likely To Get Better In 2020