Semtech Corporation (NASDAQ:SMTC) shares rose 5.4% in premarket trading Thursday following an upgrade from Northland that shifted the stock's rating from Market Perform to Outperform and assigned a $182 price target.
Northland analyst Gus Richard highlighted the company's connectivity product lines as gaining traction within artificial intelligence infrastructure. Richard said he sees connectivity as a current bottleneck for AI in power and performance terms, and that Semtech stands to benefit as it wins share in both copper and optical connectivity markets. The analyst noted the company's Data Center business now constitutes 30% of total revenue and that he expects it to grow to 44% by the end of calendar year 2027.
Richard's note pointed to the combined effect of Data Center and LoRa revenue streams, plus the divestiture of the cellular module business, as a driver pushing gross margins toward the mid-60% range. He described the recent quarterly results as strong and said guidance was stronger, providing the rationale for the upgrade to Outperform and the $182 price target.
Separately, Baird analyst Tristan Gerra raised his price target on Semtech to $300 from $225 and maintained an Outperform rating on the stock.
The firm-level figures cited by Northland emphasize a shift in Semtech's revenue mix toward Data Center applications. The 30% share attributed to Data Center sales and the projection to reach 44% by the end of CY27 are central to Northland's margin and valuation outlook. According to the analyst's assessment, the combination of higher-margin Data Center and LoRa businesses together with shedding the cellular module unit is expected to lift gross margin into the mid-60% range.
Investors reacting in premarket trading pushed the share price higher after the note. The upgrade and target changes from two separate brokerages underscore differing valuations and outlooks among analysts, with both firms signaling confidence in Semtech's positioning in connectivity for AI and data center markets.
Note: The article reports analyst commentary and company revenue mix figures as presented in analyst notes. Projections cited reflect the expectations stated by the analyst.