Shares of Silicon Motion Technology Corp SIMO have outperformed the Zacks Electronic-Semiconductor industry following the recently announced first-quarter 2017 preliminary results. Both revenues and gross margins are now estimated to be in line with the top end of the company’s original guidance that was issued on Jan 24, 2017.
Silicon Motion’s original revenue guidance range was $121–$128 million, which reflected 11–16% decline on a sequential basis primarily due to seasonally soft client SSD Controller sales, flat eMMC controller sales and declining SSD solution sales.
However, SSD controller sales were anticipated to resume in the second quarter driven by strong pipeline of SSD controller projects, including new PCIe/NVMe SSD controllers.
On a year-over-year basis, sales were expected to grow in the range of 7–14% on the back of robust performance from client SSD controllers, eMMC and UFS controllers along with SSD solutions.
Silicon Motion Technology Corporation Revenue (TTM)
Silicon Motion Technology Corporation Revenue (TTM) | Silicon Motion Technology Corporation Quote
Silicon Motion now anticipates non-GAAP gross margin to be in the top end of its original guidance range of 48–50%. In the original guidance, operating margin was projected in the range of 23–25% for first-quarter 2017. (Read More: Silicon Motion Beats Q4 Earnings, Sales Estimates)
Share Price Momentum to Continue
We note that since fourth-quarter 2016 results (Jan 23, 2017), Silicon Motion shares have increased 6.5% outperforming S&P 500’s gain of 2.8%. The better-than-expected preliminary results suggest that the odds are improving for the company.
We expect share price momentum to continue backed by significant improvement in NAND flash supply in second-half 2017. Moreover, strategic product launches and strong commitment toward R&D activities are key catalysts.
Zacks Rank & Key Picks
Silicon Motion carries a Zacks Rank #3 (Hold). Broadcom Limited AVGO, Applied Optoelectronics AAOI and Advanced Micro Devices AMD are better-ranked stocks in the sector. While Broadcom and Applied Optoelectronics sport a Zacks Rank #1 (Strong Buy), AMD carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term earnings growth rate for Broadcom, Applied Optoelectronics and AMD are currently pegged at 13.6%, 18.3% and 6.3%, respectively.
Sell These Stocks. Now.
Just released, today's 220 Zacks Rank #5 Strong Sells demand urgent attention. If any are lurking in your portfolio or Watch List, they should be removed immediately. These are sinister companies because many appear to be sound investments. However, from 1988 through 2016, stocks from our Strong Sell list have actually performed 6X worse than the S&P 500.
See today's Zacks "Strong Sells" absolutely free >>.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Broadcom Limited (AVGO): Free Stock Analysis Report
Advanced Micro Devices, Inc. (AMD): Free Stock Analysis Report
Silicon Motion Technology Corporation (SIMO): Free Stock Analysis Report
Applied Optoelectronics, Inc. (AAOI): Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research