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Investing.com -- Shares of Semtech (NASDAQ: NASDAQ:SMTC (NASDAQ:SMTX)) plunged 27% following the company’s announcement that its fiscal year 2026 net sales from CopperEdge products are expected to be lower than previously estimated. The revision comes as a result of changes in server rack architecture and feedback from a key server rack customer, indicating no expected sales ramp-up during the fiscal year.
The company’s updated forecast contrasts with its prior floor case estimate of $50 million for CopperEdge sales, which are utilized in active copper cables. Despite the setback, Semtech anticipates diversity in its CopperEdge portfolio across multiple customers, end-users, and applications, and it continues to collaborate on future generation server rack designs that will include its products.
In response to the news, Stifel analyst Tore Svanberg lowered the price target on Semtech to $70.00 from $75.00 but maintained a Buy rating. Svanberg’s comments reflect a tempered outlook: "While we are disappointed with the Friday afternoon disclosure, we maintain our Buy Rating on SMTC shares at this time, while adjusting our TP slightly to $70 (from $75), reflecting the reduced NT upside potential in CY25E and based on 6.1x EV/CY25E sales."
Needham analyst N. Quinn Bolton also adjusted the price target, reducing it significantly from $74.00 to $54.00, while still maintaining a Buy rating. Bolton’s comments highlight the impact of the revised forecast: "As the ACC/linear equalizer opportunity was seen by investors as the biggest near-term revenue driver for Semtech, removal of this revenue stream is likely to compress Semtech’s valuation multiple. We reduce our PT to $54, based on 30x our "worst case" CY26 NG EPS estimate of $1.80."
The market’s reaction reflects concerns over the company’s growth prospects and the potential impact on future earnings. Investors and analysts will be closely monitoring Semtech’s ability to diversify its CopperEdge portfolio and secure new applications for its products.
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