Semtech shares plummeted Thursday after the chipmaker badly missed the mark with its outlook for the current quarter. SMTC stock fell more than 27% on the news.
The Camarillo, Calif.-based company late Wednesday said it earned an adjusted 87 cents a share on sales of $209.3 million in its fiscal second quarter ended July 31. Analysts had expected Semtech earnings of 85 cents a share on sales of $208.3 million. On a year-over-year basis, Semtech earnings rose 34% while sales climbed 13%.
For the current quarter, Semtech forecast adjusted earnings of 63 cents a share on sales of $175 million. That's based on the midpoint of its outlook. However, Wall Street was looking for earnings of 90 cents a share on sales of $215.6 million in the fiscal third quarter. In the year-earlier period, Semtech earned 74 cents a share on sales of $194.9 million.
"The macro demand environment is deteriorating and, as a result, we are anticipating a weaker second-half performance," Chief Executive Mohan Maheswaran said in a news release.
SMTC Stock Retreats After Report
Semtech is seeing the most weakness in sales of chips for consumer devices, such as smartphones.
On the stock market today, SMTC stock dropped 27.2% to close at 33.65. During the regular session Wednesday, SMTC stock slid 1.4% to 46.19.
SMTC stock has fallen since the company announced Aug. 2 that it intends to buy Sierra Wireless for $1.2 billion.
Sierra Wireless makes networking products that span cellular networks, data centers and the Internet of Things.
Semtech makes analog and mixed-signal semiconductor products for infrastructure, consumer and industrial equipment. A key focus area for Semtech is LoRa technology for Internet of Things applications. LoRa, short for "long range," is a low-power, wide-area-network wireless technology.
Semtech Stock Revisions
Two Wall Street firms downgraded SMTC stock to neutral from buy after the report: Cowen and Oppenheimer. At least four others cut their price targets on the stock.
"Weaker demand trends combined with the recently announced margin-dilutive Sierra Wireless deal that has received mixed reviews in our industry conversations move us to the sidelines," Cowen analyst Matthew Ramsay said in a note to clients.
SMTC stock ranks No. 14 out of 34 stocks in IBD's fabless semiconductor industry group, according to IBD Stock Checkup. It has an IBD Composite Rating of 48 out of 99. IBD's Composite Rating combines five separate proprietary ratings into one easy-to-use rating. The best growth stocks have a Composite Rating of 90 or better.
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