What Happened?
A number of stocks jumped in the morning session after weaker-than-expected U.S. employment data cooled Treasury yields, easing interest rate pressure.
The Bureau of Labor Statistics reported that nonfarm payrolls increased by 29,000 in September, falling short of the 84,000 projected by economists polled by Dow Jones, while the unemployment rate rose to 4.2%. For the broader group, softer hiring eases interest-rate pressure on high-multiple growth equities by pulling borrowing costs lower. However, further deceleration in the labor market risks dampening cyclical end-market demand across industrial and automotive chip channels. Semiconductor valuations expand when falling yields reduce the discount rate on long-duration earnings, provided enterprise infrastructure spending does not deteriorate.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks.
Among others, the following stocks were impacted:
- Analog Semiconductors company MACOM (NASDAQ: MTSI) jumped 5.9%. Is now the time to buy MACOM? Access our full analysis report here, it’s free.
- Analog Semiconductors company Texas Instruments (NASDAQ: TXN) jumped 4.2%. Is now the time to buy Texas Instruments? Access our full analysis report here, it’s free.
- Semiconductor Manufacturing company Semtech (NASDAQ: SMTC) jumped 6.8%. Is now the time to buy Semtech? Access our full analysis report here, it’s free.
- Semiconductor Manufacturing company Amkor (NASDAQ: AMKR) jumped 4.6%. Is now the time to buy Amkor? Access our full analysis report here, it’s free.
- Semiconductor Manufacturing company Teradyne (NASDAQ: TER) jumped 6.4%. Is now the time to buy Teradyne? Access our full analysis report here, it’s free.
Zooming In On Semtech (SMTC)
Semtech’s shares are extremely volatile and have had 75 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was about 20 hours ago when the stock gained 5.1% on the news that StreetInsider reported that Oppenheimer raised its price target on the company's stock to $225 from $200 and reiterated an Outperform rating. According to StreetInsider, the firm raised its price target following meetings with company management. Oppenheimer cited strong demand across artificial intelligence data centers and forecasted that data center sales will exceed 40% of total revenue. Analyst Rick Schafer pointed to ongoing expansion in artificial intelligence infrastructure as a key driver for the business.
Semtech is up 167% since the beginning of the year, and at $201.24 per share, it has set a new 52-week high. Investors who bought $1,000 worth of Semtech’s shares 5 years ago would now be looking at an investment worth $2,570.
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