It’s probably one of, if not the, oddest histories of insider buying we’ve seen before. Executives just don’t purchase Semtech Corporation (SMTC).
Prior to last week, there was one buy of SMTC in the last 20 years, for less than $100,000. During the same time, directors and C-Cuite officers sold over and over and over again, deep red, to the tune of nearly $261 million. (1) We cannot recall a similar disparity.
Semtech Director Paly Walsh’s trading history is nearly as lopsided. For 14 years, from May 2007 until December 2021, Walsh sold and sold and sold some more, collecting more than $22 million over the years. (2) And then the Director had the ultimate change of heart, acquiring 20,000 shares of the semiconductor maker, investing $496,520.
It is the most unusual combination of insider trading we’ve ever seen.
Based in Camarillo, California, Semtech is a high-performance semiconductor, Internet of Things (IoT) systems, and cloud connectivity service provider dedicated to delivering high-quality technology solutions that enable a smarter, more connected, and sustainable planet. Its global teams are committed to empowering solution architects and application developers to develop breakthrough products for the infrastructure, industrial and consumer markets.
Walsh could be a winner if Wall Street is right. Analysts have a consensus one-year price target of $34.90. (3) That equates to 33.56 percent upside potential based on SMTC last price of $26.13.
The street expects the company’s profits to rebound next year. The consensus earnings per share (EPS) for this year is a loss of 7 cents. That number is projected to jump to a profit of 71 cents pers share next year (fiscal year 2025). Sales are expected to climb nearly 17 percent this year, from $756.53 million last year to $883.19 million. Next year’s topline is projected to keep on moving up to $959.33 million. (4)
It’s possible that Director Walsh is thinking beyond next year.
According to Fortune Business Insights, “The global Internet of Things (IoT) market is projected to grow from $662.21 billion in 2023 to $3,352.97 billion by 2030, at a CAGR of 26.1% during the forecast period.”
The report added, “the technology is expected to open up new revenue streams, drive business efficiencies, facilitate new business models, and improve the way existing services are delivered across many different sectors.” (5)
In the event SMTC lives up to Wall Street’s view and benefits from industry trends, shares could possibly get a boost from a short squeeze. Right now, almost 16 percent of the company float (shares available for trading) are sold short. (6)
Overall: Semtech Corporation (SMTC) appears to offer shareholders attractive potential upside based on Wall Street’s price target, earnings/sales expectations, IoT market potential, and the possibility of a short-term pop if short positions are forced to cover in the face of a rising stock price.
With a five-year beta of 1.7, SMTC is only appropriate for investors with well-above average risk tolerance and a time horizon of at least 18 months.
Rich Meyers
1 – https://www.secform4.com/insider-trading/88941.htm
2 – https://www.secform4.com/insider-trading/1362672.htm
3 – https://finance.yahoo.com/quote/SMTC?p=SMTC
4 – https://finance.yahoo.com/quote/SMTC/analysis?p=SMTC
5 – https://www.fortunebusinessinsights.com/industry-reports/internet-of-things-iot-market-100307
6 – https://finance.yahoo.com/quote/SMTC/key-statistics?p=SMTC