Opinions
Bruce Sellery
SMTC Manufacturing
SMTX-Q
BUY
Nov 10, 2000
Stock price when the opinion was issued
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This is a very successful semiconductor company trading near historical highs. If he owned this, he would be thinking of selling it, even though it keeps going up. The debt load is higher than he likes. The semiconductor sector is back in favor, and is more appropriate for momentum investors than contrarian investors at this time.
SMTC manufactures and designs analog and mixed-signal semiconductor products and advanced algorithms. Revenue growth was has been solid in FY 2024, but it is operating at a high net loss. The balance sheet is highly levered with a net debt balance of $1.26B. Cash from operations and free cash flow are also highly negative over the last twelve months. There is potential here as SMTC is expected to be a large benficiary of AI and the company will be launching new AI platforms that should fuel future growth. EPS forecast in 2025 are expected to almost 6x 2024 levels. Right now, the momentum and fundemental standing of SMTC if far too negative and makes us want to stay away, however, if it's new products can contribute significantly to earnings and revenue it could potentially be worth a look.
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