Semiconductor company Semtech (NASDAQ: SMTC) met Wall Street’s revenue expectations in Q4 CY2024, with sales up 30.1% year on year to $251 million. On the other hand, next quarter’s revenue guidance of $250 million was less impressive, coming in 2.5% below analysts’ estimates. Its non-GAAP profit of $0.40 per share was 25.6% above analysts’ consensus estimates.
Is now the time to buy Semtech? Find out by accessing our full research report, it’s free.
Semtech (SMTC) Q4 CY2024 Highlights:
- Revenue: $251 million vs analyst estimates of $251.4 million (30.1% year-on-year growth, in line)
- Adjusted EPS: $0.40 vs analyst estimates of $0.32 (25.6% beat)
- Adjusted EBITDA: $57.8 million vs analyst estimates of $57.1 million (23% margin, 1.2% beat)
- Revenue Guidance for Q1 CY2025 is $250 million at the midpoint, below analyst estimates of $256.5 million
- Adjusted EPS guidance for Q1 CY2025 is $0.37 at the midpoint, above analyst estimates of $0.34
- EBITDA guidance for Q1 CY2025 is $53.3 million at the midpoint, above analyst estimates of $49.74 million
- Operating Margin: 8.4%, up from -321% in the same quarter last year
- Free Cash Flow Margin: 12.3%, up from 6.3% in the same quarter last year
- Inventory Days Outstanding: 124, down from 131 in the previous quarter
- Market Capitalization: $2.92 billion
Company Overview
A public company since the late 1960s, Semtech (NASDAQ: SMTC) is a provider of analog and mixed-signal semiconductors used for Internet of Things systems and cloud connectivity.
Semiconductor Manufacturing
The semiconductor industry is driven by demand for advanced electronic products like smartphones, PCs, servers, and data storage. The need for technologies like artificial intelligence, 5G networks, and smart cars is also creating the next wave of growth for the industry. Keeping up with this dynamism requires new tools that can design, fabricate, and test chips at ever smaller sizes and more complex architectures, creating a dire need for semiconductor capital manufacturing equipment.
Sales Growth
A company’s long-term performance is an indicator of its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Luckily, Semtech’s sales grew at a solid 10.7% compounded annual growth rate over the last five years. Its growth beat the average semiconductor company and shows its offerings resonate with customers. Semiconductors are a cyclical industry, and long-term investors should be prepared for periods of high growth followed by periods of revenue contractions.
We at StockStory place the most emphasis on long-term growth, but within semiconductors, a half-decade historical view may miss new demand cycles or industry trends like AI. Semtech’s annualized revenue growth of 9.6% over the last two years is below its five-year trend, but we still think the results suggest healthy demand. 
This quarter, Semtech’s year-on-year revenue growth of 30.1% was wonderful, and its $251 million of revenue was in line with Wall Street’s estimates. Company management is currently guiding for a 21.3% year-on-year increase in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 13.8% over the next 12 months, an improvement versus the last two years. This projection is healthy and implies its newer products and services will spur better top-line performance.
Here at StockStory, we certainly understand the potential of thematic investing. Diverse winners from Microsoft (MSFT) to Alphabet (GOOG), Coca-Cola (KO) to Monster Beverage (MNST) could all have been identified as promising growth stories with a megatrend driving the growth. So, in that spirit, we’ve identified a relatively under-the-radar profitable growth stock benefiting from the rise of AI, available to you FREE via this link.
Product Demand & Outstanding Inventory
Days Inventory Outstanding (DIO) is an important metric for chipmakers, as it reflects a business’ capital intensity and the cyclical nature of semiconductor supply and demand. In a tight supply environment, inventories tend to be stable, allowing chipmakers to exert pricing power. Steadily increasing DIO can be a warning sign that demand is weak, and if inventories continue to rise, the company may have to downsize production.
This quarter, Semtech’s DIO came in at 124, which is 26 days below its five-year average. At the moment, these numbers show no indication of an excessive inventory buildup.
Key Takeaways from Semtech’s Q4 Results
We were impressed by how significantly Semtech blew past analysts’ EPS and EBITDA expectations this quarter. We were also glad its inventory levels shrunk. On the other hand, its revenue guidance for next quarter missed significantly. Overall, this quarter was mixed but still had some key positives. The stock traded up 11.2% to $36.27 immediately after reporting.
So do we think Semtech is an attractive buy at the current price? The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.
