Analysts raise price targets as SMART Global warrants a 25% discount.

Weak details or not, the price implosion of 25%. Global SMART NASDAQ:SGH stock price is an opportune time to buy this stock. Expectations were high at the start of the second quarter report and end-market normalization is still in play, so the weakness is not surprising. The bottom line is that this company is well positioned for the decade-long AI upgrade cycle that has just begun, and there are reasons to think it has extremely deep value.

“AI is also reshaping the memory market landscape as the need for higher density and higher bandwidth becomes increasingly critical to the system performance needed to handle the most advanced computing workloads,” said Mark Adams, CEO of SMART Global.

Analysts like what they saw in the report; two of the five stocks tracked by Marketbeat have significantly raised their price targets, suggesting this stock has extremely deep value. Stifel Nicolaus and Needham & Company maintained Buy ratings, in line with the broader consensus, and raised their price targets to $27.50 and $27. This is significant because they are raising the low end of the range, which sees a 40% upside from current prices. The consensus from five analysts is that the stock is worth about $31 or an upside of about 55%.

SMART Global Holdings is approaching critical juncture

SMART Global Holdings had a difficult quarter, primarily due to persistently high inventories in the memory end-market. However, signs of improving demand are emerging with higher sequential results, and the forecast includes an acceleration of activity in the second half of the year and a return to growth by the first quarter of 2025.

Second quarter 2024 results are mixed. The company produced net revenue of $284.8 million, a decline of 33.6% from last year. Revenue missed the consensus estimate reported by Marketbeat, but by only ten basis points, and margins were better than expected. LED is the only segment to experience year-over-year growth, while intelligent platform solutions are the only segment to grow sequentially. ISP is the company’s largest operating segment, which grew 19% on a sequential basis and is expected to remain strong through the end of the year.

Margin news is mixed. The company reported a sequential contraction, but year-over-year gains left adjusted EPS up $0.03 and $0.02, better than expected. The guidance is what left the market cold. The company is driving for sequential improvement but not NVIDIA NASDAQ:NVDA-like artificial intelligence, incentivize the intended market. Regardless, the guidelines are sufficient to maintain a positive outlook for the company, including improving shareholder value.

Balance sheet highlights include an improved cash position, lower inventories and an increase in total assets compounded by debt and liability reduction. The net result is a 40% increase in shareholder value, another factor that suggests extremely deep value. This stock trades at just 16 times earnings compared to double or triple that amount for other well-positioned semiconductor/components players.

SMART Global Holdings stock price fell to a critical support level

Price action in SGH fell 25% after the Q2 release and could fall further. Among the warnings for investors and traders is that this move was amplified by economic data released in conjunction with the second quarter results. This data made up the March CPI report, interesting by any measure, and triggered a broad market sell-off that left the semiconductor industry down 2%. The market is at a critical and potentially very strong support level, so a rebound can also be expected. The question is how high it will be and whether the market will be able to sustain an uptrend for this stock.

The risk is that the third quarter results are not in line with the prospects of accelerating commercial activity in the second half of the year. In that scenario, SGH stock could remain in a range at or near current levels until there is more economic clarity. Critical resistance is near $21.70; a move above that level could lead to a retest of the 2023 highs. The crucial support level is near $19.30 and the midpoint of the existing trading range.

Before you consider SMART Global, you’ll want to hear this.

MarketBeat tracks daily Wall Street’s highest-rated and best-performing research analysts and the stocks they recommend to their clients. MarketBeat identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market takes hold… and SMART Global wasn’t on the list.

While SMART Global currently has a “buy” rating among analysts, top-rated analysts believe these five stocks are better buys.

View the five stocks here

MarketBeat has just published the list of 20 stocks drawn up by Wall Street analysts hate. These companies may appear to have good fundamentals, but top analysts smell something seriously rotten. They are one of these companies lurking around your wallet? Find out by clicking the link below.

Get this free report