Smart Global Holdings (SGH), a maker of computer memory and data storage systems, crushed Wall Street’s estimates for its fiscal third quarter. SGH stock jumped on the news Wednesday.Springer is here with a look at how the software company is positioned for its next phase of growth.
The Newark, Calif.-based company late Tuesday said it earned an adjusted $1.39 a share on sales of $437.7 million for the quarter ended May 28. Analysts expected Smart Global Holdings to earn $1.09 a share on sales of $415 million. On a year-over-year basis, Smart Global Holdings earnings rocketed 99% while sales rose 56%.
In a news release, Chief Executive Mark Adams said the company’s third-quarter results showed the benefits of its diversification strategy. On March 1, Smart Global Holdings completed its acquisition of Cree‘s (CREE) light-emitting diode, or LED, business.
For the current quarter, Smart Global Holdings expects to earn an adjusted $1.60 a share on sales of $460 million, based on the midpoint of its outlook. That forecast translates to year-over-year growth of 95% in earnings and 55% in sales.
SGH Stock Gets Price-Target Hikes
In morning trading on the stock market today, SGH stock surged 16.7%, near 55.50. SGH stock is nearing a buy point of 57.79 out of a 12-week consolidation pattern, according to IBD MarketSmith charts.
In a note to clients, Jefferies analyst Mark Lipacis called SGH stock an “under-the-radar transformation play.” He reiterated his buy rating on SGH stock and raised his price target to 72 from 65.
Needham analyst Rajvindra Gill maintained his buy rating on SGH stock and upped his price target to 75 from 65.
“Smart Global came in with a strong beat-and-raise quarter,” Gill said in his note to clients. “SGH stands to benefit from the recovery in the memory cycle and the shift towards high-density, high-margin applications.”
SGH stock ranks first out of nine stocks in IBD’s Computer-Data Storage industry group, according to IBD Stock Checkup. That group ranks No. 76 out of 197 industry groups that IBD tracks.
SGH stock has an IBD Composite Rating of 95 out of 99. That means it has outperformed 95% of stocks in key technical and fundamental metrics over the past 12 months.