Semtech share target raised, buy rating continued on balance sheet strength

Investing.com  |  Editor Natashya Angelica

Published Dec 12, 2024 23:42

Semtech share target raised, buy rating continued on balance sheet strength

On Thursday, Needham maintained a positive outlook on shares of Semtech Corp . (NASDAQ: NASDAQ:SMTC (NASDAQ:SMTX)), increasing the stock's price target to $74 from $70, while reiterating a Buy rating. The adjustment comes after Semtech's recent financial maneuver, which involved a follow-on offering of common stock last week. This offering successfully raised an estimated $640.7 million in net proceeds, which the company plans to use primarily for debt reduction.

The strategic move to pay down debt is expected to bolster Semtech's financial position by significantly cutting its annual interest expenses by approximately $48 million. Moreover, the debt reduction is projected to lower the company's net leverage ratio to around 2.1x by the fourth fiscal quarter of 2025, which ends in January.

The analyst from Needham highlighted that this financial strategy is likely to be accretive to the non-GAAP (NG) earnings per share (EPS) for fiscal years 2026 and 2027.

The company's efforts to streamline its balance sheet are seen as a step forward in its ongoing divestiture and portfolio optimization strategy. The strengthened balance sheet is also anticipated to improve Semtech's position in negotiations, potentially leading to more favorable outcomes for the company.

With the successful follow-on offering alleviating concerns regarding the company's balance sheet, management is expected to shift focus towards driving revenue growth, enhancing profit margins, and refining its product portfolio. The new price target of $74 is based on a 30 times multiple of Needham's calendar year 2026 non-GAAP EPS estimate for Semtech.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

Get The App
Join the millions of people who stay on top of global financial markets with Investing.com.
Download Now

Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.

Sign out
Are you sure you want to sign out?
NoYes
CancelYes
Saving Changes