SMART Analyst Slashes Price Target By 25% Citing Macro Challenges In LED & Memory Segments

  • Needham analyst Rajvindra Gill maintained SMART Global Holdings, Inc SGH with a Buy and cut the price target from $40 to $30.
  • SMART reported quarterly sales of $438.00 million, down 6.4% year-on-year, missing the consensus of $440.00 million.
  • SMART reported quarterly adjusted EPS of $0.80, which beat the consensus of $0.65. 
  • SMART reported a solid print given the volatile macroeconomic climate though the LED and Memory segments were affected by supply chain and demand challenges, especially in Brazil.
  • Meanwhile, Intelligent Platform Solutions (IPS) continues to be strong, growing 48% Y/Y, and should grow over 50% Y/Y in FY23 when factoring in the Stratus acquisition.
  • He opted for caution amidst a weakening macroeconomic backdrop. 
  • His Memory and LED estimates move significantly lower.
  • Net, his FY23 revenue number comes down to $100 million, despite the Stratus acquisition adding $150 million to the top line.
  • His price target moves to $30 based on a 50/50 blend of EV/S (~1.2x) and P/E (9x) on his reduced FY23 estimates. 
  • He continues to favor the shifting business underneath the hood.
  • He models the IPS segment (higher margin, higher growth) to account for 38% of revenue in FY23, up from 24% in the last three years.
  • Price Action: SGH shares traded lower by 5.14% at $16.14 on the last check Wednesday.
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