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Semtech shares drop despite earnings beat

By   /   Thursday, March 18th, 2021  /   Comments Off on Semtech shares drop despite earnings beat

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Semtech, a Camarillo semiconductor company specializing in Internet of Things applications, finished the 2020-21 fiscal year strong, beating analysts’ expectations and capping off a record-setting year.

Semtech reported net sales of $164.1 million in the quarter ended Jan. 31, a 19.3% increase from the same quarter a year before, the company said in its fourth quarter and full year earnings release on March 17.

As a result, Semtech produced earnings per share worth 51 cents, 3 cents higher than what analysts at Zacks’ Consensus Estimate had predicted.

Part of the success could be attributed to stronger demand in both Asian and North American markets.

In the fourth quarter, shipments into Asia represented 79% of net sales while North America accounted for 12% and Europe represented the remaining 9%.

“Stronger demand from our Asian smartphone customers, along with record revenue from our North American smartphone customers contributed to the Q4 strength,” CEO Mohan Maheswaran said during the company’s March 17 earnings call.

Net income also rose, from $2.9 million in the fourth quarter of the 2019-20 fiscal year to $15.6 million in 2021.

Net sales for the full year increased 9%, to $595.1 million, while net income soared 88%, rising to $59.8 million in fiscal year 2021.

“Our business fundamentals remain strong and we are well positioned to benefit from the secular drivers in the high growth markets of IoT, communications, infrastructure and mobile devices,” Semtech CFO Emeka Chukwu said during the earnings call.

Semtech released financial results after the markets closed with the stock price closing at $73.09 on March 17. Shares were down 5.8% the next day, with stock closing at $68.88.

For the first quarter of the 2021-22 fiscal year, Semtech expects net sales to be between $164 million and $172 million, higher than the Zacks’ Consensus Estimate prediction of $156.4 million.

The reason for high expectations continues to be the success of Semtech’s LoRa technology. LoRa connects sensors to the cloud and enables real-time communication of data and analytics.

Semtech still remains high on its technology because it provides tracking for health, wealth, and other things people have been particularly concerned with during the pandemic.

The company had a record $88 million in net sales from LoRa-related activity last year, 19% growth from the previous year. 

As a whole, wireless and sensing product group revenues, which contributed 33% to total revenues, increased 32% year over year, driven by record net sales of LoRa platform products.

“We expect net revenues from our wireless and sensing product group to increase and deliver another record quarter led by growth from our LoRa business,” Maheswaran said.

The company also saw record highs in net sales during the last fiscal year from its data center, 10G-PON and 5G markets in fiscal year 2021, and Maheswaran said he expects those markets to continue to grow.

“5G base stations are increasing. 4G also is increasing. PON is doing nicely. And as I mentioned, 10-gig PON specifically because of the bandwidth expansion needs is increasing quite nicely,” he said. “The other thing is it’s not just China, and I think that’s an important takeaway, is that we are starting to see a lot more activity in both 5G and PON in North America and Europe and other regions of the world.”

Semtech ended the fiscal year with cash and cash equivalents worth $268.9 million. The company also repurchased 1.6 million of its shares for $71.4 million in fiscal year 2021.

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