What happens to stocks if AI loses momentum?
On Wednesday, Stifel analysts increased their price target on Semtech Corp . (NASDAQ:SMTC) shares to $45 from the previous $42, while keeping a Buy rating on the stock. The company’s shares, currently trading at $38.78, have shown significant volatility with a 52-week range of $24.05 to $79.52. According to InvestingPro data, the stock has experienced a strong return over the last month despite taking a substantial hit over the past six months. The adjustment follows Semtech’s release of its first-quarter fiscal year 2026 results, which showed a slight outperformance compared to Stifel’s estimates, with revenue and non-GAAP (NG) earnings per share (EPS) surpassing expectations by 0.4% and $0.01, respectively.
The company’s guidance for the second quarter of fiscal year 2026 also indicated a modest increase over prior estimates, with midpoints for revenue and NG EPS up by 0.4% and $0.01, respectively. While InvestingPro analysis shows the company isn’t currently profitable, with a -$2.26 EPS over the last twelve months, analysts expect a return to profitability this year. Stifel’s analysis highlighted Semtech’s ongoing momentum in infrastructure growth, despite a short-term air pocket in the Advanced Communications and Computing ( ACC (NSE:ACC)) business.
Semtech’s next-generation ACC products, branded as CopperEdge™, have been generating significant interest due to their capability to deliver 5-meter and 3-meter reach lengths at speeds of 800G and 1.6T. This marks a significant improvement over the 1.1-meter reach of the company’s first-generation solution. Stifel also noted contributions from other segments, including LoRa technology for applications in robotics, unmanned aerial vehicles (UAVs), and smart buildings, as well as proximity sensors for smart glasses and SurgeSwitch devices.
The firm anticipates improvements in Semtech’s profitability, with non-GAAP operating margins (OMs) expected to rise from 16.4% in fiscal year 2025 to 18.9% in fiscal year 2026 and 20.2% in fiscal year 2027. This is in line with projections that non-GAAP EPS will grow at approximately twice the rate of revenue growth in fiscal year 2027. The company maintains strong liquidity with a current ratio of 2.07, and InvestingPro analysis reveals 8 additional key insights about Semtech’s financial health and growth prospects available to subscribers.
Stifel’s updated 12-month price target of $45 reflects a valuation of 3.9 times the estimated calendar year 2026 enterprise value to sales (EV/Sales) ratio. This new target represents Stifel’s confidence in Semtech’s growth trajectory and potential for increased profitability in the coming years.
In other recent news, Semtech Corporation reported its first-quarter fiscal year 2026 earnings, surpassing expectations with an adjusted earnings per share (EPS) of $0.38, slightly above the forecast of $0.37. The company achieved a revenue of $251.1 million, exceeding the anticipated $250.09 million. Analysts from Susquehanna maintained a Positive rating with a $60 price target, noting growth potential in Semtech’s product areas, including engagements with NVIDIA (NASDAQ:NVDA) for future projects. Needham analysts also upheld a Buy rating with a $54 price target, highlighting strong first-quarter results driven by data center infrastructure shipments and LoRa-enabled solutions.
Stifel analysts raised their price target for Semtech to $45, maintaining a Buy rating following the company’s financial performance that slightly exceeded their estimates. They expect continued momentum in infrastructure growth and an improvement in non-GAAP operating margins. Semtech’s guidance for the second quarter projects net sales of $256 million, with anticipated growth in the data center and high-end consumer segments. The company remains focused on AI connectivity and LoRa technology, while also committing to debt reduction with recent prepayments of term loan principal.
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