SGH Faces Revenue Challenges: Analyst Adjusts FY24 Estimates Amid Macro And Supply Headwinds

Stifel analyst Brian Chin reiterated a Buy rating on SMART Global Holdings, Inc. SGH, lowering the price target to $26 from $32.

The company reported Q4 earnings of $0.35 per share, which missed the analyst consensus estimate of $0.45, a 56.25% decrease over earnings of $0.80 per share from last year. 

While the miss can be partially explained by management moving the for-sale Brazil memory business into discontinued ops, even normalized, F4Q would be toward the low end of the range.

In F1Q, the analyst notes that removing Brazil while guiding for a further step-down in specialty memory and IPS drives the more challenging reset to estimates.

The analyst previewed the possibility that Brazil could move into discontinued ops, and were more surprised that revenue for specialty memory and IPS have yet to stabilize. 

The analyst adds that Macro (and some supply) headwinds were largely referenced. 

SGH sees enterprise customers working down inventory the next 1-2 quarters, impacting memory sales. 

Some deals have taken longer to close in IPS, citing one that pushed from late F4Q into F1Q. LED is expected to show gradual improvement.

Based on the above, the analyst lowered FY24 EPS to $1.05 from $2.50.

For FY24, the analyst lowered revenue to $1.22 billion from $1.76 billion.

Price Action: SGH shares are trading lower by 43.99% to $13.21 on the last check Friday.