Semtech Corporation shares rose as investors digested the company’s second quarter results and weaker-than-expected guidance that sent its stock lower in after-hours trading on Wednesday.
The semiconductor company’s shares had gained 5.7% at US$24.17 early on Thursday afternoon to be flat week-over-week.
Analysts at Baird Equity Research have an ‘Outperform’ rating and a $40 price target on the stock.
They believe that, despite weak end demand, significant opportunities exist for Semtech’s core business.
“Operating cash flow is being pressured due to the softer demand environment,” they wrote in a note to clients.
“Net leverage was 5.3 times as of the end of 2Q fiscal 2024 and is expected to increase throughout the rest of the year.”
They noted that Semtech has taken actions to preserve cash and maintain compliance with its debt covenants and that it expects to maintain compliance over the next 12 months.
They added that they continue to believe that Semtech is uniquely positioned in the non-digital signal processing (DSP)-based solutions.
“Tri-edge and fibre-edge application improved in 2Q fiscal 2024 driven by U.S. hyperscalers,” the analysts wrote.
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