Semtech (SMTC) Scales New 52-Week High Of $26.23

Shares of Semtech Corporation (NASDAQ:SMTC) climbed a new 52-week high of $26.23 on Aug 16, eventually closing at $25.85. The company returned 56.6% in the past one year and has added approximately 2.2% year to date. Average volume of shares traded over the last three months was roughly 401K.

What's Driving Semtech Corporation?

Semtech Corporation manufactures a wide range of analog and mixed-signal semiconductors, including Standard Semiconductor Products, Rectifier and Assembly Products, and Other Products. We believe that the company’s new design wins, product launches and perfect execution will take it from strength to strength.

The price appreciation can be attributed to the recent divestiture of its Snowbush IP business sold to Rambus Inc. (NASDAQ:RMBS) for $32.5 million in cash plus "additional payments based upon specific new product sales through the end of 2022." The deal is expected to be wrapped up by the third quarter of fiscal 2016. The completion of the buyout is subject to fulfillment of customary closing conditions.

Semtech expects to recognize a gain on the successful disposal of the Snowbush IP business in the year the transaction closes. The sale is in-line with the company’s aim, which is to shift its focus toward its core business while winding up the production of those items that no longer align with the company’s plan of providing analog/mixed signal product platforms. This in turn will de-leverage its business and strengthen its financial position.

In the fiscal first quarter, results of which were reported on June 2, earnings of 22 cents per share beat the Zacks Consensus Estimate of 20 cents. Also, Semtech’s revenues of $131.1 million were up 10.6% sequentially and 0.8% year over year. The increase was driven by strong demand reinforcing the company’s enterprise computing, industrial and communication end markets, partially offset by the weakness in the company’s high-end consumer end markets.

Additionally, Semtech delivered an average positive earnings surprise of nearly 18.50% over the trailing four quarters. The company’s unrivalled market position, its compelling product lines, strong revenue growth, continued innovation and strong long-term growth potential consolidate its market presence favorably.

The company expects to report fiscal second-quarter results this week.

For the upcoming quarter, the company projects revenues in the range of $130.0 million to $140.0 million, while the Zacks Consensus Estimate is pegged at $135.5 million. Gross profit margin is expected within 59.6–60.2% on a GAAP basis and 60.0–60.5% on a non-GAAP basis.

Semtech Corporation currently has a Zacks Rank #3 (Hold).

Stocks to Consider

Some well-placed stocks in the same space are Silicon Laboratories Inc. (NASDAQ:SLAB) , sporting a Zacks Rank #1 (Strong Buy) and Inphi Corp. (NYSE:IPHI) , sporting a Zacks Rank #2 (Buy).