Semtech Corporation (SMTC): Integrated circuits for the broad market

The firm surprised the Street last week, when it reported Q2 EPS of 18 cents and revenues of $67 million. Analysts had been expecting 10 cents and $63 million. Management also guided Q3 EPS to 21-22 cents (12 cent consensus) and Q3 revenues to about $76.4-$77.7 million ($65.74M consensus). In discussion the solid outlook, the CEO noted "very strong orders". SMTC shares popped through 30-day, 50-day and 90-day moving average resistance on the news and have since been forming a bullish "pennant" consolidation pattern. Equities frequently exit pennants moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.

Brokers recommend the issue with five "strong buys", two "buys", six "holds" and three "sells". Analysts see a 31% growth rate, through the next year. The stock's Price to Sales ratio (4.50) and Price to Book ratio (3.08) compare favorably with industry and sector averages. Institutional investors hold about 95% of the outstanding shares. The stock is one of those used to calculate the S&P 400 MidCap Index. Over the past 52 weeks, it has traded between $11.99 and $18.38. A stop-loss of $15.50 looks good here.