Semtech Stock’s Rebound Didn’t Last Long Even as Wall Street Sees Strength in Near-Term Earnings Targets

Semtech expects data-center revenue to more than double in fiscal 2027 and 2028. (Dreamstime)

Key Points

• Semtech falls Friday, extending its decline from Thursday following its analyst day.
• The semiconductor company raises its fiscal third-quarter 2027 revenue guidance to a midpoint of $417.5 million.
• Semtech projects its data-center revenue will reach $475 million in fiscal 2027 and $1 billion in fiscal 2028.

Global semiconductor company Semtech stock reversed course after initially rising in premarket trading Friday. The move came after the company raised its near-term guidance but offered disappointing longer-term revenue expectations.

Wall Street, however, still sees Semtech as a key winner of the artificial-intelligence-infrastructure boom.

At its Data Center Analyst Day on Thursday, Semtech said it projects data-center revenue to more than double in both fiscal 2027 and 2028, reaching $475 million one year and $1 billion the following. The company added it expects total fiscal 2030 revenue to total $3.2 billion, with nearly 66% allocated toward data centers.

The catalyst? As optical modules require more of the company’s chips to transfer large amounts of data faster, Semtech sells the specialized tiny chips needed to process high-speed light signals. The shift toward AI-driven optical connections has created massive fresh demand for their products.

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Investors didn’t appear too pleased initially with management’s targets, sending shares down 10% on Thursday. Investors likely were disappointed because Semtech’s long-term growth targets for fiscal years 2029 and 2030 implied a slowdown from explosive growth in the near term.

As of the close of trading Thursday, Semtech stock had initially gone up as high as 5.9% in premarket trading Friday before dropping after the opening bell. Shares fell 2.2% to $141.03 and were heading for their worst three-day stretch since the three days ending Aug. 20, according to Dow Jones Market Data.

It was a different story as some analysts on Wall Street kept their bullish stance firm on Semtech.

StoneX analyst Cody Acree brushed off the selloff, saying near-term earnings performance has gotten stronger. The analyst said Friday that investors should focus on these solid short-term earnings rather than worrying about growth decelerations years away. The firm reiterated its Buy rating and $230 price target on Semtech stock, suggesting nearly 60% upside from Thursday’s closing price of $144.21.

Acree saw another positive: Semtech’s addressable market for data-center connectivity will expand from $3 billion to $15 billion over four years.

Morgan Stanley analyst Joseph Moore raised Semtech’s price target to $205 from $195, pointing to Semtech’s stronger data center revenue trajectory. He also increased the company’s revenue estimates for fiscal 2028 by about 18% and adjusted earnings per share by nearly 28%.

Moore thinks Semtech’s fiscal 2030 revenue targets leave room for upside, but the company’s “implied growth remains ambitious.” The firm maintained its Equal Weight rating on the stock.

Needham analyst N. Quinn Bolton also reaffirmed his Buy rating on Semtech with a $200 price target. The firm anticipates the company will generate $9.15 a share in net profit in 2028.

The average rating on Semtech stock on Wall Street is Buy with an average price target of nearly $217.

Semtech also boosted its outlook for the fiscal third quarter of 2027, aiming to reach $417.5 million in revenue at the midpoint, up 56% from a year ago, and $1.14 in adjusted diluted earnings per share. Prior to the guidance boost, Semtech projected revenue of around $410 million and adjusted earnings of $1.05.

Shares of Semtech have risen nearly 95% this year as of the close of trading Thursday, according to Dow Jones Market Data.

Write to Mariapaula Gonzalez at mariapaula.gonzalez@barrons.com

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