Rosenblatt analyst Kevin Cassidy expected SMART Global Holdings Inc. (SGH) to deliver a slight beat-n-raise to consensus 3QF22 and 4QF22 outlook. Cassidy maintained his Buy recommendation and $60 price target.
Cassidy saw upside coming from data center demand for Specialty Memory. The demand for SGH’s Penguin Solutions AI/HPC systems has remained robust. However, supply chain constraints likely limited shipments.
He modeled the Intelligent Platform Solutions (18 percent of 2Q22 revenue) business to be up 10 percent q/q and down 5 percent y/y to $90 million. IPS' customers include large enterprises like Meta Platforms Inc., where SGH is helping provide AI-optimized capabilities for Meta’s cutting-edge supercomputer.
He modeled the LED Solutions (24 percent of 2Q22 revenue) business segment to be flat q/q and up 4 percent y/y as the business continues to benefit from the transition to outsourced manufacturing and customer wins in various markets.
He modeled the Memory Solutions’ (58 percent of 2Q22 revenue) Specialty Memory segment to be up 3 percent q/q at $135 million and up 11 percent y/y.
Specialty Memory were custom modules for U.S.-based networking and data center companies. For the Brazil business, which is mostly memory modules for PCs and smartphones assembled in Brazil, he modeled revenue to be down 3 percent sequentially, in line with seasonality.
He remains comfortable with his above consensus estimate for 20 percent y/y revenue growth for IPS and SGH total revenue increasing 24 percent y/y.
Last quarter SGH management announced a $75 million share repurchase authorization. He expects that with the shares trading at 18-month lows with forward P/E valuation at 3-year lows, the share repurchases may have begun during 3QF22.
