Silicon Labratories Inc. (SLAB)

[Lotto123]

Silicon Labs Drops 14%: Look Past Speed Bump to IoT, Says Pac Crest
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Shares of chip maker Silicon Labs (SLAB) are down $6.75, or 14.4%, at $40.05, after the company this morning reported Q2 revenue and earnings per share that topped analysts’ expectations, but also forecast results this quarter below consensus.

Revenue in the three months ended in June rose almost 10%, year over year, to $154.9 million, yielding EPS of 58 cents.

Analysts had been modeling $149 million and 46 cents.

CEO Tyson Tuttle called the results “strong,” and said the company was benefitting from a “multi-year investment strategy for the IoT and the Internet infrastructure and realizing meaningful revenue growth,” referring to the Internet of Things.

For the current quarter, the company sees revenue in a range of $153 million to $157 million, and EPS in a range of 45 cents to 51 cents. That compares to the average estimate on the Street of $156.8 million and 54 cents.

One party who steps up to the defend the shares today is John Vinh of Pacific Crest Securities, who has an Outperform rating on the shares, this afternoon cut his price target to $50 from $55, while writing that “We would be buyers on the pullback.”

Vinh argues while outlook now is “cautious” in some repsects, there’s plenty to look forward to with respect to IoT:

Silicon Labs previously noted that its IoT exposure was 15% of revenue in 2013, and expected to grow tthat o 20% in 2014. The company now believes that 20% target appears conservative, given the continued strength it sees in key IoT markets including wearables, home connectivity, smart metering and industrial. We believe Silicon Labs remains well positioned to monetize IoT and exceed expectations based on its competitive assets in MCUs, sensors and wireless connectivity. Silicon Labs Remains Cautious About Q4 The company stated cautiousness regarding seasonal weakness in Q4, mainly due to typical seasonally weak demand for broadcast and timing products in that period. However, Silicon Labs expects strong traction in MCU, IoT and automotive business to continue into Q4 and partially offset seasonal weakness.