Last Update27 Aug 25Fair value Increased 9.84%
Semtech’s consensus price target has increased to $63.25, driven by strong positioning in the AI data center market, an earnings and guidance beat, upward revisions to revenue and EPS forecasts, and solid execution, reflecting higher analyst conviction in its growth outlook.
Analyst Commentary
- Bullish analysts cite strong positioning in the AI data center market, particularly with fiber, ACC (Active Copper Cable), and impending product ramps such as LPO/TIA and Nvidia's Rubin launch.
- Multiple price target increases are supported by Semtech's recent non-GAAP earnings beat and raised forward guidance, outpacing consensus expectations.
- Positive outlook is reinforced by upward revisions to revenue and EPS estimates following the above-consensus Q2 results and aligned future guidance.
- Continued momentum in the FiberEdge business, especially around ACC demand, is highlighted as a key driver of current and future performance.
- Analysts are encouraged by management’s solid operational execution, viewing it as setting a platform for material and fundamental growth into 2026.
What's in the News
- Semtech issued earnings guidance for Q3 FY26, expecting net sales of $266 million, +/- $5 million.
- Reported a goodwill impairment of $42 million for Q2 ended July 27, 2025.
- Amended and restated the company's Bylaws as approved by the Board.
- Completed repurchase of 19,043,495 shares (29.17%) for $675.19 million under the buyback program announced in March 2008; no shares were repurchased between January 27 and April 27, 2025.
Valuation Changes
Summary of Valuation Changes for Semtech
- The Consensus Analyst Price Target has risen from $57.58 to $63.25.
- The Future P/E for Semtech has significantly risen from 28.85x to 34.36x.
- The Net Profit Margin for Semtech has fallen from 22.80% to 21.04%.
Key Takeaways
- Portfolio optimization and strategic R&D investments aim to drive revenue growth and improve net margins through a focus on core competencies.
- Diversified revenue streams and market expansion from new technology applications position the company for sustained growth and enhanced earnings.
- Challenges in tech adoption, product delays, and competitive pressures may hinder Semtech's revenue growth and increase financial volatility in the near to long term.
Catalysts
About Semtech- Provides semiconductor, Internet of Things systems, and cloud connectivity service solutions in the Asia- Pacific, North America, and Europe.
- Semtech's focus on portfolio optimization and simplification is expected to drive stronger revenue growth through a more concentrated strategy on core competencies, which can improve net margins.
- Strategic investments in R&D are aimed at accelerating innovation to support broader customer programs, potentially leading to sustainable long-term revenue growth.
- The commitment to divesting noncore assets and reducing total leverage positions Semtech more favorably for future expansion, improving operational efficiency and potentially increasing earnings.
- Engagements with multiple customers for new applications of the CopperEdge technology are anticipated to result in diversified revenue streams and sales growth in FY '26, enhancing profit margins as these applications mature.
- Increased adoption of LoRa technology across various industrial applications and markets, supported by new product releases, is expected to sustain robust revenue growth and enhance earnings through expanded market penetration.
Semtech Future Earnings and Revenue Growth
Assumptions
How have these above catalysts been quantified?- Analysts are assuming Semtech's revenue will grow by 9.6% annually over the next 3 years.
- Analysts assume that profit margins will increase from -12.5% today to 22.8% in 3 years time.
- Analysts expect earnings to reach $286.4 million (and earnings per share of $2.36) by about August 2028, up from $-119.4 million today.
- In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 28.8x on those 2028 earnings, up from -36.7x today. This future PE is lower than the current PE for the US Semiconductor industry at 30.5x.
- Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
- To value all of this in today's terms, we will use a discount rate of 10.62%, as per the Simply Wall St company report.
Semtech Future Earnings Per Share Growth
Risks
What could happen that would invalidate this narrative?- The anticipated delay in CopperEdge product demand due to server rack architecture changes could negatively impact revenue growth in the near term.
- The expected ramp in CopperEdge will not materialize for several quarters, which may affect earnings visibility and cause volatility in the data center segment revenue.
- Uncertainties in the rollout and adoption timelines for new technologies such as LPO and LRO in the FiberEdge portfolio could impact long-term growth projections.
- The strategic decision to pursue portfolio optimization and asset divestitures introduces risks related to capital allocation and might affect revenue from non-core businesses.
- Competitive pressures and geopolitical factors impacting supply chains, such as being outperformed in markets where competitors have made inroads, could impact revenue and margin expansion efforts.
Valuation
How have all the factors above been brought together to estimate a fair value?- The analysts have a consensus price target of $57.583 for Semtech based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $68.0, and the most bearish reporting a price target of just $48.0.
- In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $1.3 billion, earnings will come to $286.4 million, and it would be trading on a PE ratio of 28.8x, assuming you use a discount rate of 10.6%.
- Given the current share price of $50.52, the analyst price target of $57.58 is 12.3% higher.
- We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.
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Disclaimer
AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.