Chipmaker SiTime Near All-Time High Ground On Strong Sales, Earnings Growth

Chipmaker SiTime NASDAQ: SITM is riding high in sales and revenue growth, as well as price appreciation. 

The Santa Clara, California, company specializes in silicon-based timing gear for electronic devices, including smartphones, tablets, cameras, airplanes, and even earthquake detection systems. SiTime’s products are in demand as more customers make the shift to its oscillators and away from traditional quartz crystal equipment.

SiTime’s focus is micro-electromechanical systems, called MEMS. These pieces of timing equipment are used to synchronize chips within a particular system.

SiTime has grown revenue at rates between 23% and 107% in the past eight quarters, with revenue growth accelerating in the past four quarters.

Earnings growth also accelerated during that time.

Price Jump After Q2 Report

What got my attention initially was the stock’s chart. In early August, the stock’s price jumped more than 38% in the most recent quarter, following SiTime’s second-quarter report. The company earned $0.46 per share, up from a loss of $0.14 per share in the year-earlier quarter. Revenue was $44.5 million, up 107%.

That August price increase helped the stock clear a cup-with-handle base that began in February. That base followed a 2020 gain of 339%. So far in 2021, the stock is up 98.75%. 

Shares rallied to a high of $239.34 on September 23 and have been in a shallow consolidation since then. It fell 10% on September 28 but easily found support at its 10-week moving average. Since then, it’s been trending higher along that line. The stock Friday closed at $222.46, up $0.44 or .20%.

That’s just 7% off the September 23 all-time high. 

As the current pullback has lasted just three weeks, it doesn’t yet qualify as a proper base, which should last at least five weeks. 

SiTime went public in November 2019, priced at $13. It was spun off from Japanese semiconductor maker MegaChips, which currently owns about a third of SiTime shares. 

Like many new IPOs, it formed a base soon after, although that base coincided with the global equity market meltdown at the onset of the Covid-19 pandemic. As it rallied out of that base, it began notching that huge 2020 price gain. 

The company serves various industries, including communications and enterprise, automotive, industrial, mobile and the Internet of things, consumer, and aerospace and defense. 

Business Unit Highlights

In the second-quarter earnings conference call, CFO Art Chadwick broke out highlights from business unit revenue.

“Sales into our mobile IoT and consumer segment, which consists of sales into mobile phones, wearable devices, and consumer products, were $21.7 million or 49% of sales,” he said, adding that this was down 3% sequentially, but up 114% over the same quarter last year. 

“Sales into our industrial, automotive, and aerospace segment, which includes sales into automotive, industrial, medical, aerospace, military, and broad-based sales, were $13.6 million or 31% of sales, up 88% sequentially and up 124% year over year. Sales into our Communications and Enterprise segment, which consists of wireless infrastructure including 5G, data center, and networking, were $9.2 million or 20% of sales,” he said.

This was up 58% sequentially and up 76% year over year. SiTime’s largest customer accounted for 15% of sales this quarter. It’s always a risk to have one customer constitute a big chunk of sales, but Chadwick noted that was down as a percentage of sales from the first quarter, which was the same pattern the company saw last year.

Analysts are upbeat about the company’s prospects. Wall Street sees earnings coming in at $2.31 per share this year, a gain of 413% from 2020. Next year, that’s seen rising to $3.10 per share, up another 31%. Both estimates were revised higher recently. 

According to MarketBeat data, analysts have a “buy” rating on the stock with a price target of $218, a 2% downside. 

This current dip could offer a chance to buy. The company reports its fourth-quarter on November 3, with analysts eyeing earnings of $0.40 per share on revenue of $43.92 million.