Now Is Not The Time To Buy Semtech Stock

June 10th, 2025 by Trefis Team
SMTC: Semtech logo
SMTC
Semtech

Semtech (NASDAQ:SMTC) a company specializing in analog and mixed-signal semiconductors, saw its stock rise by nearly 9% in Monday’s trading. This rally comes amid renewed optimism following trade discussions between U.S. and Chinese officials, which have fueled speculation that export controls on key technologies might be relaxed. Semiconductor companies such as Semtech have been particularly badly impacted by these trade disputes, as their essential technologies have been subjected to strict export restrictions. Semtech stock remains down by 33% year-to-date in 2025.

Image by manseok Kim from Pixabay

That said, we think that Semtech stock looks unattractive, making it a bad pick to buy at its current price of around $41. We believe there are a couple of concerns with SMTC stock, which makes it unattractive given that its current valuation looks very high. We arrive at our conclusion by comparing the current valuation of SMTC stock with its operating performance over the recent years as well as its current and historical financial condition. Our analysis of Semtech along key parameters of Growth, Profitability, Financial Stability, and Downturn Resilience shows that the company has a moderate operating performance and financial condition, as detailed below. That said, if you seek upside with lower volatility than individual stocks, the Trefis High Quality portfolio presents an alternative, having outperformed the S&P 500 and generated returns exceeding 91% since its inception.

How Does Semtech’s Valuation Look vs. The S&P 500?

Going by what you pay per dollar of sales or profit, SMTC stock looks expensive compared to the broader market.

• Semtech has a price-to-sales (P/S) ratio of 3.4 vs. a figure of 3.0 for the S&P 500
• Additionally, the company’s price-to-free cash flow (P/FCF) ratio is 52.6 compared to 20.5 for S&P 500

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How Have Semtech’s Revenues Grown Over Recent Years?

Semtech’s Revenues have seen notable growth over recent years.

• Semtech has seen its top line grow at an average rate of 7.2% over the last 3 years (vs. increase of 5.5% for S&P 500)
• Its revenues have grown 4.7% from $869 Mil to $909 Mil in the last 12 months (vs. growth of 5.5% for S&P 500)
• Also, its quarterly revenues grew 30.1% to $251 Mil in the most recent quarter from $193 Mil a year ago (vs. 4.8% improvement for S&P 500)

How Profitable Is Semtech?

Semtech’s profit margins are much worse than most companies in the Trefis coverage universe.

• Semtech’s Operating Income over the last four quarters was $62 Mil, which represents a poor Operating Margin of 6.9% (vs. 13.2% for S&P 500)
• Semtech’s Operating Cash Flow (OCF) over this period was $58 Mil, pointing to a poor OCF Margin of 6.4% (vs. 14.9% for S&P 500)
• For the last four-quarter period, Semtech’s Net Income was $-162 Mil – indicating a very poor Net Income Margin of -17.8% (vs. 11.6% for S&P 500)

Does Semtech Look Financially Stable?

Semtech’s balance sheet looks strong.

• Semtech’s Debt figure was $558 Mil at the end of the most recent quarter, while its market capitalization is $3.4 Bil (as of 6/9/2025). This implies a moderate Debt-to-Equity Ratio of 18.3% (vs. 19.9% for S&P 500). [Note: A low Debt-to-Equity Ratio is desirable]
• Cash (including cash equivalents) makes up $164 Mil of the $1.4 Bil in Total Assets for Semtech.  This yields a strong Cash-to-Assets Ratio of 11.6% (vs. 13.8% for S&P 500)

How Resilient Is SMTC Stock During A Downturn?

SMTC stock has seen an impact that was slightly worse than the benchmark S&P 500 index during some of the recent downturns. Worried about the impact of a market crash on SMTC stock? Our dashboard How Low Can Semtech Stock Go In A Market Crash? has a detailed analysis of how the stock performed during and after previous market crashes.

Inflation Shock (2022)

• SMTC stock fell 85.4% from a high of $91.99 on 19 November 2021 to $13.43 on 1 November 2023, vs. a peak-to-trough decline of 25.4% for the S&P 500
• The stock is yet to recover to its pre-Crisis high
• The highest the stock has reached since then is 77.15 on 21 January 2025, and it currently trades at around $41

Covid Pandemic (2020)

• SMTC stock fell 50.9% from a high of $54.97 on 17 January 2020 to $26.99 on 16 March 2020, vs. a peak-to-trough decline of 33.9% for the S&P 500
• The stock fully recovered to its pre-Crisis peak by 5 June 2020

Global Financial Crisis (2008)

• SMTC stock fell 58.1% from a high of $21.03 on 1 October 2007 to $8.82 on 19 November 2008, vs. a peak-to-trough decline of 56.8% for the S&P 500
• The stock fully recovered to its pre-Crisis peak by 27 October 2010

Putting All The Pieces Together: What It Means For SMTC Stock

In summary, Semtech’s performance across the parameters detailed above are as follows:

• Growth: Very Strong
• Profitability: Very Weak
• Financial Stability: Strong
• Downturn Resilience: Neutral
• Overall: Neutral

But keeping in mind its very high valuation, we think that the stock is unattractive, which supports our conclusion that SMTC is a bad stock to buy.

While you would do well to avoid SMTC stock for now, you could explore the Trefis Reinforced Value (RV) Portfolio, which has outperformed its all-cap stocks benchmark (combination of the S&P 500, S&P mid-cap, and Russell 2000 benchmark indices) to produce strong returns for investors. Why is that? The quarterly rebalanced mix of large, mid, and small-cap RV Portfolio stocks provided a responsive way to make the most of upbeat market conditions while limiting losses when markets head south, as detailed in RV Portfolio performance metrics.

 

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