MACOM (MTSI) To Acquire Wolfspeed's Radio Frequency Business
MACOM Technology Solutions MTSI has signed a definitive agreement to acquire the radio frequency (RF) business of Wolfspeed WOLF for $125 million.
The amount includes $75 million in cash and $50 million of MACOM common stock issued subject to certain restrictions.
Notably, Wolfspeed's radio frequency (RF) business offers a portfolio of Gallium Nitride (GaN) on Silicon Carbide products.
Moreover, the buyout includes a 100mm GaN wafer fabrication facility located in Research Triangle Park, NC, design teams and associated product development assets in Arizona, California and North Carolina, and back-end production capabilities in California and Malaysia.
On the back of the underlined acquisition, MACOM remains well-poised to gain solid traction among high-performance RF and microwave applications. Also, the company is likely to gain a strong foothold across the aerospace, defense, industrial and telecommunications sectors.
Further, the acquisition is likely to be accretive to MACOM’s non-GAAP earnings upon its completion. This, in turn, will likely instill investor optimism in the stock.
Notably, the deal is expected to close in the second half of 2023.
MTSI shares have gained 23.3% in the year-to-date period, outperforming the industry’s growth of 19.3%.
For the fiscal fourth quarter, MTSI’s adjusted earnings per share are anticipated to be within 53-57 cents. The Zacks Consensus Estimate for the same is pegged at 54 cents per share.
MACOM Technology Solutions Holdings, Inc. Price and Consensus
MACOM Technology Solutions Holdings, Inc. price-consensus-chart | MACOM Technology Solutions Holdings, Inc. Quote
Growth Prospects
The acquisition is anticipated to help the company further strengthen its presence in the global RF Components market.
Per a Mordor Intelligence report, the RF components market is expected to witness a CAGR of 13% during the 2023-2028 period.
Also, a report from Emergen Research indicates that the RF-based devices market size is expected to reach approximately $9.6 billion by 2028, with market revenue registering a CAGR of 13.2% during the 2021-2028 period.
Strategic Acquisitions: Key Catalyst
The latest move bodes well for MACOM’s strengthening efforts toward boosting its business growth through strategic acquisitions.
Apart from the underlined deal, MACOM recently completed the acquisition of OMMIC, an industry expert in wafer fabrication, epitaxial growth and monolithic microwave integrated circuit processing and design.
Further, its Linearizer Communications Group buyout remains noteworthy. Linearizer is a market leader in correcting distortion of communication systems and linear optical links.
We believe that increasing strategic buyouts will continue to bolster MACOM’s key offerings, which, in turn, will continue to help it sustain momentum among customers. This, in turn, will drive its financial performance in the days ahead.
For fourth-quarter fiscal 2023, MACOM expects revenues between $148 million and $152 million. The Zacks Consensus Estimate for the same is pegged at $149.99 million.
Zacks Rank & Stocks to Consider
Currently, MACOM carries a Zacks Rank #3 (Hold).
Some better-ranked stocks from the broader technology sector are NetEase NTES and Salesforce CRM. While NetEase sports a Zacks Rank #1 (Strong Buy), Salesforce carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
NetEase shares have gained 40.2% in the year-to-date period. NTES’s long-term earnings growth rate is currently projected at 13.18%.
Salesforce shares have gained 55.9% in the year-to-date period. CRM’s long-term earnings growth rate is currently projected at 19.25%.
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