Why Semtech Stock Popped, Then Dropped, on Thursday

Not all Semtech’s news was bad last night — but it wasn’t nearly as great as you may have heard.

Semtech (SMTC 0.52%) investors were all set for a banner day. Last night, the maker of semiconductors for Internet-of-Things applications announced its results for the first quarter of fiscal year 2025, ended April 28. The results included a stunning $0.06-per-share profit where analysts had predicted no profit at all, and reported $206.1 million in sales where the Street was expecting only $200.2 million.

Shares of Semtech exploded as much as 21% higher in early trading… only to turn tail and retreat later in the day. As of 12:20 p.m. ET, Semtech stock is sitting on a gain of only 0.5%.

Semtech Q1 earnings

Why the sudden rethink about whether Semtech’s results were good or bad? Well, the most obvious answer is because Semtech didn’t actually earn $0.06 per share. Yes, its non-GAAP (adjusted) profit was positive, and better than Wall Street expected. But when calculated according to generally accepted accounting principles (GAAP), Semtech actually lost $0.36 per share.

So that’s not great.

On the plus side, Semtech’s fiscal Q1 loss was less than the $0.46-per-share loss reported a year ago. On the minus side, though, the $206.1 million in revenue the company reported was worse than a year ago — down 13%.

Is Semtech stock a buy?

So basically, while there was some good news in the report, this was not an unqualifiedly great quarter for Semtech — and the news wasn’t nearly as good as investors probably first thought it was. Things could still get better as the year progresses, however.

Turning to guidance, Semtech said it will return to reporting GAAP profits in Q2, predicting anywhere from a $0.06- to a $0.12-per-share profit. Most analysts, however, still see Semtech losing money this year, and only returning to profitability in fiscal 2026 (i.e., calendar year 2025).

That’s something to look forward to. But with Semtech stock valued at $2.5 billion, burning cash, carrying $1.2 billion in net debt, and still a year away from profitability, it’s hard to call this stock a buy today.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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