SLAB - Silicon Labs Ready For The Next IoT-Fueled Run

2024-07-14 09:13:06 ET

Summary

• After a 70% peak-to-trough revenue decline, Silicon Labs is stabilizing, with promising prospects in Bluetooth and WiFi markets and AI edge deployments ready to drive the next up-cycle.
• Following sequential growth in Q1'24, SLAB should deliver 30%-plus sequential growth in Q2'24, driven by consumer/home market restocking and new wins, including glucose monitoring.
• Silicon Labs’ new Series 3 chips, with significantly greater compute capacity over Series 2, position the company well for industrial AI edge installations, enhancing its competitiveness in the IoT sector.
• With expanding addressable market opportunities, share gains, and new product launches, SLAB could achieve mid-teens revenue growth and mid-to-high teens operating margins in three years, driving a fair value of $130-$150.

Writing about Silicon Laboratories ( SLAB ) almost 18 months ago, I said that while I liked the long-term potential of this connectivity-focused IoT semiconductor company, I preferred to wait for a pullback. I didn’t expect a virtual collapse in the business (a 70% peak to trough move in revenue), nor a “pullback” of roughly 50% in the shares, as the company saw significant weakness among its customers, as well as increased competition throughout 2023....

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