Analyst: Buy The Weakness In Semtech After Q3 Report

Analog and mixed-signal semiconductor company Semtech Corporation SMTC reported net sales growth of 10 percent to $150.3 million and non-GAAP earnings of 54 cents per share on Wednesday, exceeding the 50-cents-per-share consensus estimate.

The company's fourth quarter guidance for fiscal 2018 trailed expectations, sending shares lower.

At least one analyst sees the post-earnings weakness in Semtech as a buying opportunity.

The Analyst

BWS Financial's Hamed Khorsand reviewed the results in a Thursday note and maintained a Buy rating and $49 price target for Semtech Corp. 

The Thesis

With the addition of Apple Inc. AAPL helping, Semtech reported quarterly results in line with the company's guidance, Khorsand said in the note. (See Khorsand's track record here.) 

The analyst said his focus is on the adoption of the IoT protocol LoRa and how it could drive earnings growth next year. Apple remains an incremental positive to the investment thesis, Khorsand said. 

The return of an elusive seasonality pattern is responsible for the negative stock reaction, according to BWS Financial. Since LoRa is still ramping, Khorsand said BWS' investment theme has not changed. BWS is projecting accelerated growth from Semtech's proximity sensor.

Semtech upped its LoRa gateway deployment forecast to 70,000 by the end of the fiscal year against an earlier estimate of 65,000, Khorsand said. 

"SMTC remains an attractive growth story. The lower price levels make owning the stock more appealing." 

The Price Action

Shares of Semtech, which were up close to 16 percent year-to-date ahead of the earnings, were losing 4.38 percent to $34.95 Thursday.

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