On Monday, Stifel adjusted its outlook on Semtech Corp . (NASDAQ:SMTC (NASDAQ:SMTX)), a leading supplier of high-performance analog and mixed-signal semiconductors and advanced algorithms, by increasing the share price target to $31 from the previous $26. The firm maintains a Buy rating on the stock.
The revised price target reflects a positive shift in the company's prospects, as noted by the Stifel analyst. Key factors contributing to this outlook include an uptick in demand for Passive Optical Network (PON) due to new tenders in China and continued momentum in Data Center (DC) markets.
Additionally, there are signs of a demand recovery in the company's LoRa technology, with Point of Sale (POS) increasing by 13% quarter over quarter in the fourth quarter of fiscal year 2024 and expectations for revenue growth in the first quarter of fiscal year 2025.
Stable recurring software revenue is another aspect that supports the belief that Semtech might reach its financial bottom in the first quarter of fiscal year 2025. Despite concerns over the company's high debt, which stands at $1.41 billion with an interest rate of 5.86%, the analyst points out that Semtech's positive free cash flow of $12.2 million and sufficient liquidity, backed by supportive debt covenants, provide the company with the necessary operational runway for a potential turnaround.
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