Why Were Semtech’s Shares Halted On Wednesday?

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Shares of Semtech (NADAQ: SMTC), a supplier of analog and mixed-signal semiconductor products, saw its stock halted after Wednesday’s trading session for a notable news announcement.

Once trading resumed, shares moved higher by more than 4 percent as the company announced it has entered into a new agreement with the industry giant Comcast (NASDAQ: CMSA).  The agreement involves the trial deployment by Comcast of a low-power wid earea network (LPWAN) in the U.S. based on Semtech’s Wireless Radio Frequency Technology.

The deployment is expected to start in the fourth quarter this year in Philadelphia and San Francisco and will target enterprise, government and consumer Internet of Things (IoT) applications, including metering, asset tracking, building and public venue management, among others.

If successful, Semtech noted that the partnership could be expanded to as many as 30 U.S. cities for as long as 30 months.

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The agreement between the two companies also consists of Semtech granting Comcast a Warrant to acquire 1,086,957 shares of its common stock at a price of $0.01.  The warrant will vest in several phases should milestones of the project be completed.

Consistent with the announcement, Semtech now expects to record a reduction to its GAAP net sales of around $3.8 million which could reduce its earnings per share for the same period by around $0.06.  

As such, the company now expects its total net sales to be in a range of $130 million to $138.0 million which represents a decrease from management’s prior guided range of $134.0 million to $142.00 million.
Earnings per share for the full  year are expected to now be in the range of $0.43 to $0.47 which also represents a decrease from management’s prior range of $0.49 to $0.53.

Shares of Semtech has been a strong performer since the start of 2016.  The stock has gained nearly 40 percent since the start of the year.  The one-year chart is even more impressive as investors who have held on to the stock for the past 52-weeks are sitting on a gain of nearly 90 percent.

On the other hand, Semtech’s stock is higher by just 31 percent over the past five years.  The stock peaked in 2013 at around $35 and failed to see any buying momentum before bottoming in 2015 at around $15 per share.