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SMART Global Holdings (SGH - Free Report) is a $788 million manufacturer of specialty semiconductor memory solutions, including DRAM and flash products. They are also a leading global provider of electronic components supply chain services for major OEMs.
The company is also the largest in-country manufacturer of memory for smartphones, PCs, and servers in Brazil.
In the midst of its fiscal 2018 first quarter, SMART delivered an earnings pre-announcement on November 15 where management raised their Q1 adjusted EPS view to 90-93 cents from 79-83 cents vs the Zacks Consensus of 82 cents. The revenue outlook was also boosted to $250-$260 million from $225-$240 million, vs the consensus $233 million. Here's what the CEO had to say...
"SMART's progress reinforces our confidence in our strategies," commented Iain MacKenzie, President and Chief Executive Officer of SMART Global Holdings. "We completed fiscal 2017 with significant momentum which has continued through the first two months of our first quarter of fiscal 2018."
"As we benefit from the improving economy and the introduction of new higher density products in SMART Brazil, we currently expect that our second quarter of fiscal 2018 will be similar to the updated results that are provided below for the first quarter which will demonstrate strong year-over-year growth for our second quarter of fiscal 2018," added Mr. MacKenzie.
Wall Street analysts responded with a 21% boost to the current fiscal year EPS consensus and a 18% bump to the following year. Even with the stock's 25% surge this month, these EPS estimate hikes keep the stock trading under 10X next year's projected $4+.
The Little 'Ole Success Story You Never Heard Of
Even though they've been in business for 30 years, SMART just IPO'd in May at $12. And given its growth trajectory, that was an unbelievable steal.
For FY2018 (ending next August), SGH is expected to grow the topline 38% to $1.05 billion from FY2017 sales of $761 million. That gives the stock a very attractive Price-to-Sales ratio of 0.75.
Part of the big revenue growth is all about Brazil right now as their economy recovers and consumer demand for digital electronics picks up.
But the company also has manufacturing locations in a half-dozen other cities around the globe. Founded in 1988 as Smart Modular Technologies, SGH corporate headquarters are in Newark, California and the company employs over 1,100 people.
The company now exists as a holding company for various subsidiaries across its world-wide memory manufacturing and supply chain services.
There is an R&D center in Tewksbury, MA and a European Planning & Sales Center in East Kilbride, Scotland. There are sales centers in Hong Kong and Singapore and an Advanced Package Engineering and R&D center in South Korea.
From these locations, SMART serves a rich list of industries and applications, including automotive, communications, computing, defense, gaming, industrial, and the cloud.
Micron vs. SMART
Here's what Jefferies analysts had to say to explain why they raised their PT to $45 this month, courtesy of StreetInsider.com...
SGH raised its NovQ rev outlook 10% and its EPS outlook 13% on greater than-expected demand in its Brazil memory segment. SGH has high visibility into demand due to the step-up in local content requirements in Brazil. It also expects FebQ to sustain from NovQ levels as it expects to continue supplying high demand through what is normally a seasonally slow quarter. We raise our target to $45 from $37, applying a 12x multiple to our C'18E EPS of $3.74.
Deutsche and Stifel analysts only raised their PTs to $35 and $40 respectively.
And the reason there is that those banks probably model the valuation similar to giant "peer" Micron (MU - Free Report) which currently trades at 6X forward.
But Micron is a $51 billion enterprise trading at 2.6X sales.
Whereas SGH is a $780 million company trading at 0.75 sales -- and, more importantly, with a higher double-digit growth rate.
Indeed, SGH could be an acquisition target for the behemoth of memory.
But I hope it grows and trades a lot higher before it becomes anyone's target.
Disclosure: I own SGH shares for the Zacks TAZR Trader portfolio.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Image: Bigstock
Bull of the Day: SMART Global (SGH)
SMART Global Holdings (SGH - Free Report) is a $788 million manufacturer of specialty semiconductor memory solutions, including DRAM and flash products. They are also a leading global provider of electronic components supply chain services for major OEMs.
The company is also the largest in-country manufacturer of memory for smartphones, PCs, and servers in Brazil.
In the midst of its fiscal 2018 first quarter, SMART delivered an earnings pre-announcement on November 15 where management raised their Q1 adjusted EPS view to 90-93 cents from 79-83 cents vs the Zacks Consensus of 82 cents. The revenue outlook was also boosted to $250-$260 million from $225-$240 million, vs the consensus $233 million. Here's what the CEO had to say...
"SMART's progress reinforces our confidence in our strategies," commented Iain MacKenzie, President and Chief Executive Officer of SMART Global Holdings. "We completed fiscal 2017 with significant momentum which has continued through the first two months of our first quarter of fiscal 2018."
"As we benefit from the improving economy and the introduction of new higher density products in SMART Brazil, we currently expect that our second quarter of fiscal 2018 will be similar to the updated results that are provided below for the first quarter which will demonstrate strong year-over-year growth for our second quarter of fiscal 2018," added Mr. MacKenzie.
Wall Street analysts responded with a 21% boost to the current fiscal year EPS consensus and a 18% bump to the following year. Even with the stock's 25% surge this month, these EPS estimate hikes keep the stock trading under 10X next year's projected $4+.
The Little 'Ole Success Story You Never Heard Of
Even though they've been in business for 30 years, SMART just IPO'd in May at $12. And given its growth trajectory, that was an unbelievable steal.
For FY2018 (ending next August), SGH is expected to grow the topline 38% to $1.05 billion from FY2017 sales of $761 million. That gives the stock a very attractive Price-to-Sales ratio of 0.75.
Part of the big revenue growth is all about Brazil right now as their economy recovers and consumer demand for digital electronics picks up.
But the company also has manufacturing locations in a half-dozen other cities around the globe. Founded in 1988 as Smart Modular Technologies, SGH corporate headquarters are in Newark, California and the company employs over 1,100 people.
The company now exists as a holding company for various subsidiaries across its world-wide memory manufacturing and supply chain services.
There is an R&D center in Tewksbury, MA and a European Planning & Sales Center in East Kilbride, Scotland. There are sales centers in Hong Kong and Singapore and an Advanced Package Engineering and R&D center in South Korea.
From these locations, SMART serves a rich list of industries and applications, including automotive, communications, computing, defense, gaming, industrial, and the cloud.
Micron vs. SMART
Here's what Jefferies analysts had to say to explain why they raised their PT to $45 this month, courtesy of StreetInsider.com...
SGH raised its NovQ rev outlook 10% and its EPS outlook 13% on greater than-expected demand in its Brazil memory segment. SGH has high visibility into demand due to the step-up in local content requirements in Brazil. It also expects FebQ to sustain from NovQ levels as it expects to continue supplying high demand through what is normally a seasonally slow quarter. We raise our target to $45 from $37, applying a 12x multiple to our C'18E EPS of $3.74.
Deutsche and Stifel analysts only raised their PTs to $35 and $40 respectively.
And the reason there is that those banks probably model the valuation similar to giant "peer" Micron (MU - Free Report) which currently trades at 6X forward.
But Micron is a $51 billion enterprise trading at 2.6X sales.
Whereas SGH is a $780 million company trading at 0.75 sales -- and, more importantly, with a higher double-digit growth rate.
Indeed, SGH could be an acquisition target for the behemoth of memory.
But I hope it grows and trades a lot higher before it becomes anyone's target.
Disclosure: I own SGH shares for the Zacks TAZR Trader portfolio.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Click here for the 6 trades >>