Smart Global Shares Higher After Q4 Earnings, Guidance Beat Estimates Handily

The results were ahead of the estimates.

The company's first-quarter guidance was in line with the consensus estimates.

Commenting on the results, Stifel commended the company for handily beating its and the consensus expectations for the fiscal year fourth quarter 2017.

The firm attributed the outperformance to the strengthening Brazilian economy and increasing memory average selling price. At the same time, the firm said the positive outlook was premised on increasing content in both Brazilian mobile products, improving Brazilian economy, growing importance of specialty memory in data centers and networking along with an expected continued tight supply of memory devices.

As such, the firm has a Buy rating on Smart Global, and it raised its price target on the shares of the company from $27 to $32.

Analysts Kevin Cassidy (see his track record here) and John Donnelly said the revenue outperformance was the result of the strength of the global memory market and an improved Brazilian economy. However, the analysts noted that non-GAAP gross margin of 21.6 percent was below the estimate of 22 percent.

Among the other metrics, Stifel noted that specialty memory revenue was up double digits in the second half, with the management estimating high-single-digit growth going forward.

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"Management noted a strong environment across all types of specialty memory customers with particular strength from server/storage and especially All Flash Arrays," the firm said.

The firm expects the new products to deliver a higher ASP, while maintaining a consistent gross margin.

The firm indicated that ASPs in the Brazilian mobile markets rose from $16.16 in 2016 to the low $20 range. According to the firm, the increased capacities, combined with the expected step-ups in local content laws will continue to generate growth for the company's mobile segment.

Following the company's guidance, Stifel upped its fiscal year first-quarter revenue estimate from $213 million to $232.50 million and non-GAAP earnings per share estimate from 68 cents to 80 cents.

"In our view, management has a unique and sound long term strategy for growing the company through memory cycles," the firm concluded.