Shares of Smart Global Holdings (SGH) experienced a significant drop in value on Friday following a disappointing revenue outcome. However, one analyst team maintains a positive outlook for the technology company.
Analysts Bullish on Smart Global Holdings
Needham analysts Quinn Bolton and Nick Doyle recently assumed coverage of Smart Global and reaffirmed their Buy rating on the stock. Despite lowering their price target from $37 to $22, they express confidence in its potential.
Largest Percentage Decrease in Record
Smart Global stock plummeted by 45% to $13.08, making it the company's most substantial percentage decrease based on available data dating back to May 2017.
Disappointing Fiscal Fourth Quarter Results
In its latest earnings report, Smart Global revealed fourth-quarter net sales of $316.7 million, significantly lower than the Wall Street forecast of $375 million. Notably, the company's intelligent platform solutions and memory solutions segments experienced declines, while the LED segment saw a slight increase.
Positive Outlook Amidst Challenges
Despite the underperformance of the IPS segment, analysts believe that Smart Global has the necessary components for future growth. They highlight strategic partnerships that are expected to drive revenue in the long term.
Bright Spot: High-Margin Service Business
Analysts also emphasize the company's high-margin service business as a key driver for increased valuation. They note promising advancements in services revenue from fiscal 2022 to 2023.
Maintained Buy Rating with Adjusted Price Target
Stifel analysts maintain their Buy rating on Smart Global but have adjusted their price target to $26 from $32.
It is clear that Smart Global Holdings faces challenges ahead, but analysts see potential for growth and value in certain areas of the business.