Why Semtech (SMTC) Stock Is Down Today

Jabin Bastian /
2024/06/07 3:34 pm EDT

What Happened:

Shares of semiconductor company Semtech (NASDAQ:SMTC) fell 22.5% in the morning session after the company announced the sudden departure of CEO and President Paul Pickle. Following Paul Pickle's departure, Semtech appointed Dr. Hong Q. Hou, a current member of the Board of Directors, as President and Chief Executive Officer, effective June 6, 2024. 

The company also reaffirmed its second quarter fiscal year 2025 guidance provided on June 5, 2024. 

Paul Pickle was at Semtech for nearly a year following his appointment on June 30, 2023. Under his leadership, the stock had a good run, up 40% over the past year, amidst macro challenges and a cyclical downturn in the semiconductor space. The market doesn't like uncertainty, and the stock's reaction suggests investors are likely unsure about what to expect under the new leadership.

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What is the market telling us:

Semtech's shares are quite volatile and over the last year have had 35 moves greater than 5%. But moves this big are very rare even for Semtech and that is indicating to us that this news had a significant impact on the market's perception of the business. 

The biggest move we wrote about over the last year was 12 months ago, when the stock gained 14.7% on the news that the company reported first-quarter results that beat analysts' revenue and earnings per share (EPS) estimates. Inventory levels improved significantly. 

On the other hand, there was some gross margin deterioration. Revenue guidance for the next quarter was below Consensus, while the EPS guidance was roughly inline. Management added that "we see signs of business stabilization...With an expanded highly differentiated IoT portfolio, combined with our best-in-class High Performance Analog portfolio, we are well positioned to emerge stronger from this current cycle". 

In addition, the company announced Paul Pickle as the new President and Chief Executive Officer to replace Mohan Maheswaran, who announced his retirement in March, 2023. Mr. Pickle has served as President and Chief Executive Officer and member of the Board of Directors of Lantronix since April 2019. Under his leadership, Lantronix experienced remarkable growth, with revenue expanding approximately threefold and market capitalization doubling. 

Overall it was a mixed quarter for the company. However, the market responded positively to the news of the new leadership, as reflected in the positive sentiment after the earnings announcements.

Semtech is up 43.3% since the beginning of the year, but at $31.01 per share it is still trading 24.1% below its 52-week high of $40.85 from May 2024. Investors who bought $1,000 worth of Semtech's shares 5 years ago would now be looking at an investment worth $739.63.

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