SIMO stock is a buy, Roth says

Following the release of the company’s preliminary fourth quarter results, Roth MKM analyst Suji Desilva remains bullish on Silicon Motion Technology Corp (Silicon Motion Technology Corp Stock Quote, Chart, News, Analysts, Financials NASDAQ:SIMO).

On January 5, SIMO issued a press release on its fourth quarter numbers, which it said would exceed the high end of its original guidance. The company will release the numbers after the market close on February 6. Desilva summarized the development.

“SIMO reported preliminary 4Q23 revenue growth above the high-end of prior revenue guidance of $190-198m (+10-15% q/q) and representing a recovery to flat y/y,” he wrote. “SIMO’s ability to report upside to guidance and its steady revenue recovery trajectory from 1Q23 lows heading into CY24 represent positive catalysts for the stock. We are modelling steady sequential revenue over the next few quarters as consumer notebook/smartphone supply chain demand recovers from prior inventory digestion impact. We are also encouraged by the 4Q23 GM recovery to above expectation, which affirms our belief that GM will steadily improve in CY24.

In a research update January 5, the analyst maintained his “Buy” rating and twelve-month price target of $75.00 on SIMO.

Desilva thinks SIMO will post EPS of $2.18 on revenue of $636.8-million in fiscal 2023. He expects those numbers will improve to EPS of $3.30 on a topline of $740.0-million the following year.

“Our price target of $75 represents an ex-cash CY24 P/E of 20x a slight premium to the unadjusted semiconductor median of 18.0x,” the analyst concluded. “Factors that may cause shares of SIMO to deviate from our price target include indication of softening of global memory market or inability to secure wafer as needed to support growth.”