Needham analyst N. Quinn Bolton upgraded Silicon Laboratories, Inc (NASDAQ:SLAB) to a Buy rating from a Hold rating with a price target of $150.
According to the analyst, the company is well-positioned for the semiconductor cyclical recovery.
Following the first-quarter earnings report, Bolton expects consensus estimates will reflect a more moderate recovery.
The analyst flagged how the management called out three drivers that underpin a second-half recovery, including inventory de-stocking, the ramp of new design wins and improvements in end market demand.
Bolton is encouraged by improving inventory levels at end customers and distributors, increasing order trends, robust operating leverage and new design wins that ramp up production this year.
With Street estimates moving closer to his more conservative outlook post-earnings, he noted Street estimates are more attainable.
Bolton said Silicon Laboratories is the best-positioned company in the fast-growing IoT space and is set to achieve double-digit top-line growth into calendar year 2026.
With high revenue growth and operating leverage, he noted investors will be willing to pay a premium multiple for SLAB in the cyclical recovery.
Channel mix and revenue levels are key gross margin drivers, and he expected both to improve in the second half.
Bolton expects the mix to trend higher post-second-quarter as end customers continue to burn inventory this quarter.
Bolton projects 2024 revenue and EPS of $601.4 million (prior $600.0 million) and $(1.85) (prior $(1.40)).
Silicon Laboratories stock lost 24% in the past 12 months. Investors can gain exposure to the stock via SPDR S&P Kensho Intelligent Structures ETF (NYSE:SIMS) and SPDR S&P Semiconductor ETF (NYSE:XSD).
SLAB Price Action: Silicon Laboratories shares traded higher by 2.68% at $117.33 at the last check Thursday.