SiTime Corp (NASDAQ:SITM) shares are trading higher after Needham analyst Quinn Bolton upgraded the stock rating from Hold to Buy with a $130 price target.
SiTime posted revenue of $33.0 million, down 13.9% year over year, but above Bolton’s estimate and the Street’s $32 million estimate, due to downward trends in customer inventories that resulted in a pickup in order activity. Only the Communication, Enterprise and Data Center (CED) segment grew sequentially, while most weakness came from IoT, Consumer and Mobile, he noted.
Adjusted gross margin was 57.9%, above both Bolton’s and the Street's estimates of 57.5%. Margins were negatively impacted by lower unit volumes, but this was partially offset by a favorable mix and cost reductions. Adjusted EPS was negative 8 cents, better than Bolton’s estimate and the Street’s forecast of negative 15 cents. The beat was driven by high-end revenue and gross margins, along with improved interest income.
The company guided second-quarter revenue to $41.0 million, well above Bolton’s estimate of $36.0 million and the Street’s $36.5 million estimate. Growth is expected to come from all segments.
SiTime posted beat and raise results as customer inventories declined and order activity picked up, Bolton noted.
Inventory digestion is dissipating and should be in the rearview mirror post second-quarter as per the analyst. SITM has seen a pickup in bookings so far in the second-quarter that is stronger than they would’ve expected 90 days ago.
The company currently has good visibility into the third-quarter and he noted visibility is getting back to normal, pre-pandemic levels which supports a stronger calendar second-half 2024.
Management sees year-on-year revenue growth returning to the ~30% Y/Y level in the second quarter of fiscal 2024 to the fourth quarter of fiscal 2024. Bolton is confident about continued growth in fiscal 2025, driven by solid growth and traction in CED.
As visibility improved and revenue growth was set to return to target levels, he upgraded the rating on the SITM stock.
Price Action: SiTime shares are trading higher by 31% at $127.58 at last check Thursday.
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