MACOM Tech Stock is a 5G Rollout and Integration Semiconductor Play

Wireless semiconductor solutions company MACOM Technology Solutions NASDAQ: MTSI stock has peaked with the rest of the chip stocks after near parabolic ascent off pandemic lows. The maker of radio frequency (RF) chips still has strong tailwinds on the horizon with broad 5G rollout and integration, strong defense contracts combined with the chip shortage. A new product cycle aimed at 5G and data center will also scale more top-line growth in the coming quarters as the Company prepares for the International Microwave Symposium in June 2021. As chip stocks undergo profit-taking downdrafts, prudent investors can be rewarded for their patience with opportunistic pullbacks to consider slowly scaling into positions.

Q2 FY 2021 Earnings Release

On April 29, 2021, MACOM released its fiscal second-quarter 2021 results for the quarter ending March 2021. The Company reported an earnings-per-share (EPS) profit of $0.51 excluding non-recurring items beating consensus analyst estimates of $0.47, by $0.04. Revenues rose 19.1% year-over-year (YoY) to $150.6 million beating analyst estimates of $150 million. GAAP Gross margins were 55.9% versus 50.1% in the same year-ago period. GAAP operating income was $19 million versus a loss of (-$5.3 million) in the same year-ago period.

Raised Q3 EPS Guidance

The Company raised Q3 fiscal 2021 EPS guidance to $0.52 to $0.56 versus $0.48 consensus analyst estimates. Revenues are expected to come in between $150 million to $154 million versus $151.22 analyst estimates. Adjust gross margins are expected between 58% to 60%.

Conference Call Takeaways

MACOM CEO Steve Daly elaborated on a breakthrough, “Over the past 18 months, our device and process engineers have been collaborating to produce the industry’s highest voltage silicon capacitors. The team has achieved industry-leading 1800 volt standoff performance, which opens up new markets and new opportunities for MACOM. This new process utilize several, one-of-a-kind proprietary MACOM technologies and it builds upon our unique knowledge in creating deep trench via structures in very conductive silicon substrates. Our breakthrough here was to successfully develop high-quality dielectric material that can withstand extremely high voltages and then combine it with our proprietary processes to maximize voltage performance. Capacitors are ubiquitous in electronic systems. Our business strategy is to target non-commodity systems where customers will pay a premium for a semiconductor solution with superior stability, reliability, chip-scale size and high voltage operation. This includes radar systems, medical systems, automotive, renewable energy and various industry applications.” CEO Daily expects this innovation add at least $100 million in sales.

International Microwave Symposium

The Company plans to attend the IMS in Atlanta, GA, in June 2021. They will be providing a number of virtual demonstrations of their technology in three categories high-performance discretes, RF power and millimeter-wave. The discrete component demos will include the Company’s KV CAP product used in simulated medical applications and military applications. The RF power will showcase 3 kilowatt power level from a single device and Gallium Nitride (GaN) showcasing high-efficiency performance between 3.1 and 3.5 gigahertz using a 100 watt power amplifier. They will also demonstrate a 5G massive multiple-input multiple-output transmitters and receivers (MIMO) GaN solution 400 megahertz, 110 watt Doherty amplifier performance in a digital pre-distortion (DPD) system. The 2 millimeter wave demo includes a 5G 28 gigahertz transceiver front-end module combined with KA band mimic power amplifiers to create of 10 watts of power. The Company also plans to showcase its new 50G reference for 5G wireless mid-haul applications. The demos should provide a catalyst for shares in June, enabling prudent investors enough time to patiently await opportunistic pullbacks ahead of time.

MTSI Opportunistic Pullback Levels

Using the rifle charts on the monthly and weekly time frames provides a broader view of the playing field for MTSI shares. The monthly rifle chart uptrend formed a market structure high (MSH) sell trigger on a breakdown below $55.02. The monthly 5-period moving average (MA) has stalled at $58.18 as the monthly stochastic peaked off the 90-band crossing down. The weekly rifle chart formed a downtrend with a falling 5-period MA resistance at $59.17 as the stochastic mini inverse pup continues it oscillation lower with lower Bollinger Bands (BBs) at $49.19. The daily market structure low (MSL) triggers on a breakout above $58.50 forming after the last peak off the $63.45 Fibonacci (fib) level. Prudent investors can watch for opportunistic pullback levels at the $51.38 fib, $47.66 fib, $44.86 fib, $40.55 fib, and the $38.72 fib. The upside trajectories range from the $71.98 fib up towards the $85.68 price level.