Semtech Corp., a leading analog and mixed-signal chip maker, experienced a sharp decline in its shares on Wednesday. Despite Wall Street’s expectations of a profit, the company forecasted a loss for the current quarter.
Market Response
Following this announcement, Semtech’s shares, traded as SMTC, fell by as much as 6% in after-hours trading. This decline followed a slight increase of 0.7% during the regular trading session, with the stock closing at $22.87.
Disappointing Outlook
Semtech projected an adjusted loss ranging from 22 cents to 9 cents per share for the third quarter. Moreover, they expected their revenue to be between $190 million and $210 million. In contrast, analysts surveyed by FactSet had estimated adjusted earnings of 12 cents per share on revenue of $247.7 million.
CEO’s Perspective
Semtech’s CEO, Paul Pickle, acknowledged the challenges posed by broader economic uncertainties and high channel inventory. However, he expressed confidence in the company’s ability to overcome these obstacles and adapt to evolving economic conditions through ongoing operational refinements and a strong presence in key markets.
Financial Performance
In the second quarter, Semtech reported a loss of $382 million or $5.97 per share, compared to a loss of $29.4 million or 46 cents per share in the same period last year. Excluding stock-based compensation expenses and a $279.6 million goodwill impairment charge, the company’s adjusted earnings were 11 cents per share. This figure represents a significant decline from 87 cents per share in the previous year. Despite the loss, Semtech experienced a slight increase in revenue, rising to $238.4 million from $236.5 million in the same quarter last year.
Market Analysts’ Concerns
Notably, Semtech’s late filing of its quarterly report as notified to the Securities and Exchange Commission caused concern among investors. Additionally, while the company recently appointed a new chief financial officer, it lost coverage from a prominent stock analyst. TD Cowen analyst Matthew Ramsay discontinued his coverage of Semtech after suggesting that the company’s restructuring and turnaround efforts were far from complete. Ramsay had also warned of potential challenges arising from Semtech’s cash acquisition of Sierra Wireless, citing the rapid recognition of goodwill impairment.
In summary, Semtech faces an uphill battle as it navigates economic uncertainties and works towards recovering from recent losses. Despite the challenges, the company remains determined to leverage operational improvements and capitalize on its strategic position in key markets.
