Semtech Corporation SMTC announced the completion of Sierra Wireless’ takeover for $1.2 billion.
Sierra Wireless is a leading provider of wireless data communications products. It holds a strong position in cellular IoT and delivers robust and diverse device-to-cloud IoT solutions.
Sierra Wireless is the founding member of the WirelessReady Alliance, an alliance of industry-leading hardware, software and service companies committed to the delivery of complete and compelling wireless data solutions.
The buyout of Sierra Wireless is anticipated to be accretive immediately to Semtech’s non-GAAP earnings per share.
Semtech Corporation Price and Consensus
Semtech Corporation price-consensus-chart | Semtech Corporation Quote
Acquisition Benefits
With the Sierra acquisition, Semtech aims to double its annual revenues and add $100 million of high-margin IoT Cloud services recurring revenues. SMTC also expects to generate $40 million of run rate operational synergies in the next 12-18 months.
The Sierra takeover expanded Semtech’s portfolio of IoT solutions. Moreover, it will help SMTC capitalize in the prospects present in the booming IoT market.
Per The Insight Partners, the global IoT market is likely to reach $2.27 trillion by 2028 from $483.3 billion in 2022, witnessing a CAGR of 29.4% during the 2022-2028 forecast period.
Strengthening position in the IoT market will help Semtech win the confidence of the investors in the near and long terms.
Shares of SMTC have lost 61.6% in the past year compared with the Computer and Technology sector’s decline of 29.1%.
Portfolio Strength
The acquisition of Sierra Wireless naturally bolstered Semtech’s portfolio offerings.
Further, SMTC keeps bringing reliable and efficient technologies to provide better solutions to customers.
The company recently released the HotSwitch platform which includes integrated load switches and eFuses with elevated protection feature. With the HotSwitch platform, Semtech expanded its portfolio of protection solutions.
Semtech unveiled the new ClearEdge CDR Transmitter solution for data center and wireless long-reach applications. It also announced production of 50Gbps Tri-Edge CDR integrated circuit solution for 5G front haul deployments.
These apart, SMTC introduced the LoRa Developer Portal to help developers quickly develop IoT devices connected with the LoRaWAN standard.
We believe that Semtech’s portfolio strength will continue to help it sustain momentum among customers.
Zacks Rank & Stocks to Consider
Currently, Semtech carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader Zacks Computer & Technology sector are Arista Networks ANET, Agilent Technologies A and ASML Holding ASML. While Arista Networks sports a Zacks Rank #1 (Strong Buy), Agilent and ASML carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Arista Networks has lost 10.1% in the past year. The long-term earnings growth rate for ANET is currently projected at 17.5%.
Agilent Technologies has gained 7.8% in the past year. A’s long-term earnings growth rate is currently projected at 10%.
ASML Holding has moved 10.6% south in the past year. The long-term earnings growth rate for ASML is currently projected at 23.7%.
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