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Semtech to Boost Presence in Smart Home Space With CABA Deal

Zacks Equity Research

Semtech Corporation SMTC is leaving no stone unturned to bolster its footprint in the booming IoT space backed by its robust Low power, high Range (LoRa) devices and wireless radio frequency technology.

Its latest move of joining forces with Continental Automated Buildings Association (CABA) only reinforces the opinion. Per the deal, the company’s LoRa technology will be leveraged to enhance and innovate CABA’s portfolio of smart home and building technologies.

We note that LoRa aids in seamless deployment of IoT devices.

Consequently, the move is likely to boost the adoption rate of the company’s LoRa technology which in turn will drive the top line.

Market Opportunities to Aid Growth

The deal will strengthen Semtech’s presence in the booming smart home space on the back of growing proliferation of computing technologies Internet usage, smart home devices and IoT devices.

Per a report from MarketsandMarkets, the global smart home market is expected to witness a CAGR of 12% over the period of 2018 and 2024 to reach $151.4 billion by 2024.

Further, an IDC report indicates that global shipment of smart home devices is expected to hit 1.6 billion by 2023 driven by growing smart home devices market which is anticipated to witness a CAGR of 16.9% between 2019 and 2023.

With the help of CABA deal and LoRa technology, Semtech will be able to reap benefits from the potential smart home and devices market as the latest deal will provide strong access to members of the smart home and building ecosystem such as government entities, utility providers and system integrators.

This will aid in momentum of the company’s LoRa-based solutions in this space.

Semtech Corporation Revenue (TTM)

 

Semtech Corporation Revenue (TTM)

Semtech Corporation revenue-ttm | Semtech Corporation Quote

LoRa Technology: A Key Catalyst

Semtech is witnessing growing strategic alliance and contracts, thanks to the cost-efficient abilities of LoRa technology in creating and deploying IoT solutions.

Apart from the current deal, the company recently announced that this technology will be put to use in Ineo-Sense’s Clover-Core series of sensor products for tracking assets in manufacturing sites.

Additionally, per a deal between Ineo-Sense and Lauak Group, the former will provide LoRa-enabled asset tracking sensors that will be integrated into the latter’s manufacturing containers.

Further, it has been selected to be used in Brazil’s network, which is based on the LoRaWAN protocol, deployed by American Tower (ATC). Moreover, Lemonbeat has adopted LoRa technology to enhance its smart metering solutions.

We believe Semtech is well poised to rapidly penetrate into the expanding IoT market with the aid of its highly popular LoRa technology. According to a report from Global Data, the market is expected to reach $318 billion by 2023 at a CAGR of 20% between 2018 and 2023.

However, Semtech continues to be affected by mounting competition in the semiconductor space, including sluggish demand in China. The resultant pricing pressure could dampen the company’s margins and profitability. Moreover, seasonality in the consumer segment remains a woe and might hamper the top line.

Zacks Rank & Stocks to Consider

Currently, Semtech carries a Zacks Rank #4 (Sell).

Some better-ranked stocks that can be considered in the broader technology sector are eGain Corporation EGAN, Cirrus Logic, Inc. CRUS and NXP Semiconductors N.V. NXPI. While eGain and Cirrus Logic flaunt a Zacks Rank #1 (Strong Buy), NXP Semiconductors carry 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 eGain, Cirrus Logic and NXP Semiconductors is currently pegged at 30%, 15% and 12.5%, respectively.

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