MWelsh
Silicon Motion Technology's (NASDAQ:SIMO) stock rose about 3% on Thursday after Q3 results beat estimates and Roth upgraded the shares to Buy from Neutral.
The firm also raised its price target on the stock to $60 from $75.
The analysts said that the Hong Kong-based company reported above-consensus Q3'23 revenue growth and guided for continued healthy Q4'23 revenue growth of +10 to 14% quarter-over-quarter reflecting improving visibility and channel progress with inventory digestion.
Reflecting the beat and raise in the quarter, the analysts have greater confidence in their CY'24 growth forecast. They also tweaked their EPS for higher research and development, or R&D, and a longer than expected gross margin, or GM, recovery.
The analysts noted that revenue in Q3 continued a sequential recovery, growing +23% quarter-over-quarter and came in ahead of consensus +18% quarter-on-quarter expectations.
In the quarter, eMMC/UFS eMMC+UFS controller sales grew +100% to 105% quarter-over-quarter, recovering sharply from prior smartphone inventory digestion in the channel. Meanwhile, SSD controller sales increased +5% to 10% quarter-over-quarter, improved with recovering PC notebook seasonal ordering patterns in the quarter, according to the analysts.
SSD Solutions declined 5% to 10% quarter-over-quarter, remaining impacted by cautious data center infrastructure spending.
The company expects Q4'23 revenue to be between $190M and $198M; consensus $172.89M.
The analysts noted that despite the projected operating expense growth, they are encouraged that the company's operating margins are steadying in the mid-teens with potential to further recover into approximately 20% range in the next several quarters.
In addition, the analysts think Silicon Motion (SIMO) is investing in new product efforts, which can help steer revenue growth over the next several quarters, mainly in newer growth areas such as enterprise SSD.
Silicon Motion (SIMO) has a Hold rating at Seeking Alpha's Quant Rating system, which consistently beats the market. Meanwhile, the Seeking Alpha authors' (1 author) average rating is more positive with a Buy and so is the average Wall Street analysts' rating.