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Silicon Motion (SIMO) Stock Down on Bleak Q2 Interim Results
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Silicon Motion Technology Corporation (SIMO - Free Report) recently reported preliminary second-quarter 2020 results. The company now anticipates non-GAAP revenues to be within the lower half of the previously guided range of $133 million to $143 million (mid-point of $138 million) issued on Apr 29.
The revised guidance translates to revenues of approximately $135.5 million at the mid-point of lower half of the prior guidance. Meanwhile, the Zacks Consensus Estimate for revenues is pegged at $139.5 million, almost 3% above $135.5 million.
This does not bode well for the upcoming earnings release, as it hints toward downward estimate revisions and plausible revenue miss.
The revenue guidance originally reflected growth of 3.8% on a sequential basis at the mid-point level. The revised guidance now translates into growth of roughly 2% on a quarter-over-quarter basis.
Following the news, Silicon Motion stock declined 11.6% on Jul 7. Notably, the company’s shares have shed 15.4% in the year-to-date period, against the industry’s rally of 4.4%.
Markedly, Silicon Motion is scheduled to report second-quarter 2020 results on Jul 29, 2020.
Margin Update
Silicon Motion now projects non-GAAP gross margin to be near the high-end of the company’s prior guidance of 47.5% to 49.5%.
However, the company did not provide any update on its non-GAAP operating margin metrics. The company had previously guided on-GAAP operating margin to lie in the 20-22% band.
In first-quarter 2020, the company had reported non-GAAP gross margin of 48.2%, which contracted 110 basis points (bps) sequentially. Non-GAAP operating margin contracted 430 bps on quarter-over-quarter basis to 20.1%.
Noteworthy Factors
Intensifying competition in the USB flash drive controller market and an anticipated dip in smartphone sales resulting from the coronavirus outbreak, as indicated by latest IDC data, might get reflected in the second-quarter top line.
Nevertheless, Silicon Motion has been benefiting from improvement in demand for SSD Solutions. Particularly, growing clout of Shannon SSDs remains a positive. Moreover, the company expects to gain from increased PC sales triggered by online learning and work-from-home wave.
Further, China’s anticipated economic recovery post lockdown holds promise. Additionally, positive trends in smartphone embedded storage transitioning from eMMC to UFS controller devices; and shift from HDDs to SSDs across PCs and other client devices bode well.
Additionally, the company’s efforts to reward shareholders through dividend payments despite coronavirus crisis are expected to instill investor confidence in the stock. Also, Silicon Motion has a trailing four-quarter positive earnings surprise of 13.26%, on average.
Notably, the Zacks Consensus Estimate for earnings has remained unchanged for the past 60 days at 76 cents, indicating year-over-year growth of 46.2%.
Zacks Rank & Other Key Picks
Currently, Silicon Motion carries a Zacks Rank #1 (Strong Buy).
Long-term earnings growth rate for Zoom Video, Fortinet and Nice is pegged at 25%, 14% and 10%, respectively.
5 Stocks to Soar Past the Pandemic: In addition to the companies you learned about above, we invite you to learn about 5 cutting-edge stocks that could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of the decade.
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Silicon Motion (SIMO) Stock Down on Bleak Q2 Interim Results
Silicon Motion Technology Corporation (SIMO - Free Report) recently reported preliminary second-quarter 2020 results. The company now anticipates non-GAAP revenues to be within the lower half of the previously guided range of $133 million to $143 million (mid-point of $138 million) issued on Apr 29.
The revised guidance translates to revenues of approximately $135.5 million at the mid-point of lower half of the prior guidance. Meanwhile, the Zacks Consensus Estimate for revenues is pegged at $139.5 million, almost 3% above $135.5 million.
This does not bode well for the upcoming earnings release, as it hints toward downward estimate revisions and plausible revenue miss.
The revenue guidance originally reflected growth of 3.8% on a sequential basis at the mid-point level. The revised guidance now translates into growth of roughly 2% on a quarter-over-quarter basis.
Following the news, Silicon Motion stock declined 11.6% on Jul 7. Notably, the company’s shares have shed 15.4% in the year-to-date period, against the industry’s rally of 4.4%.
Markedly, Silicon Motion is scheduled to report second-quarter 2020 results on Jul 29, 2020.
Margin Update
Silicon Motion now projects non-GAAP gross margin to be near the high-end of the company’s prior guidance of 47.5% to 49.5%.
However, the company did not provide any update on its non-GAAP operating margin metrics. The company had previously guided on-GAAP operating margin to lie in the 20-22% band.
In first-quarter 2020, the company had reported non-GAAP gross margin of 48.2%, which contracted 110 basis points (bps) sequentially. Non-GAAP operating margin contracted 430 bps on quarter-over-quarter basis to 20.1%.
Noteworthy Factors
Intensifying competition in the USB flash drive controller market and an anticipated dip in smartphone sales resulting from the coronavirus outbreak, as indicated by latest IDC data, might get reflected in the second-quarter top line.
Nevertheless, Silicon Motion has been benefiting from improvement in demand for SSD Solutions. Particularly, growing clout of Shannon SSDs remains a positive. Moreover, the company expects to gain from increased PC sales triggered by online learning and work-from-home wave.
Further, China’s anticipated economic recovery post lockdown holds promise. Additionally, positive trends in smartphone embedded storage transitioning from eMMC to UFS controller devices; and shift from HDDs to SSDs across PCs and other client devices bode well.
Additionally, the company’s efforts to reward shareholders through dividend payments despite coronavirus crisis are expected to instill investor confidence in the stock. Also, Silicon Motion has a trailing four-quarter positive earnings surprise of 13.26%, on average.
Notably, the Zacks Consensus Estimate for earnings has remained unchanged for the past 60 days at 76 cents, indicating year-over-year growth of 46.2%.
Zacks Rank & Other Key Picks
Currently, Silicon Motion carries a Zacks Rank #1 (Strong Buy).
Zoom Video Communications, Inc. (ZM - Free Report) , Fortinet, Inc. (FTNT - Free Report) and Nice Ltd. (NICE - Free Report) are some other top-ranked stocks worth considering in the broader computer and technology sector, each flaunting a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term earnings growth rate for Zoom Video, Fortinet and Nice is pegged at 25%, 14% and 10%, respectively.
5 Stocks to Soar Past the Pandemic: In addition to the companies you learned about above, we invite you to learn about 5 cutting-edge stocks that could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of the decade.
See the 5 high-tech stocks now>>