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SIMO

Silicon Motion Technology NasdaqGS:SIMO Stock Report

Last Price

US$69.20

Market Cap

US$2.4b

7D

2.5%

1Y

0.8%

Updated

04 Oct, 2022

Data

Company Financials +
SIMO fundamental analysis
Snowflake Score
Valuation6/6
Future Growth3/6
Past Performance5/6
Financial Health6/6
Dividends4/6

SIMO Stock Overview

Silicon Motion Technology Corporation, together with its subsidiaries, designs, develops, and markets NAND flash controllers for solid-state storage devices.

Silicon Motion Technology Corporation Competitors

Price History & Performance

Summary of all time highs, changes and price drops for Silicon Motion Technology
Historical stock prices
Current Share PriceUS$69.20
52 Week HighUS$98.65
52 Week LowUS$64.41
Beta0.99
1 Month Change-2.78%
3 Month Change-14.42%
1 Year Change0.77%
3 Year Change91.21%
5 Year Change32.09%
Change since IPO559.05%

Recent News & Updates

Sep 23

Silicon Motion And MaxLinear: Caught In Limbo With A Merger Less Likely

Summary Shareholders gave their blessing, but a merger between SIMO and MXL has nonetheless become less likely due to pushback in China. There are reasons for China to have reservations about the proposed merger, but that does not necessarily mean the merger is dead on arrival. The more time passes without regulatory approval, the less likely it becomes the merger will go through as planned for several reasons. The latest developments are more in favor of a failed merger than a successful one and anyone long SIMO has to take note accordingly. Silicon Motion Technology Corporation (SIMO), a supplier of NAND controller chips, received some good news and some bad news. SIMO shareholders approved of the proposed merger with MaxLinear (MXL), bringing the proposal one step closer to reality by removing a key hurdle. However, the good news was almost immediately offset by bad news out of China. The gap between the proposed acquisition price and the actual stock price got even bigger as a result. Why will be covered next. The market is increasingly losing faith in a successful merger The chart below shows how the stock surged higher on May 5 when SIMO and MXL proposed a merger with the latter acquiring the former in a cash and stock transaction valued at $3.8B or $114.34 per ADS. Every SIMO shareholder will get 0.388 share of MXL stock for each ADS, plus $93.54 in cash. Source: finviz.com However, the chart shows something else. The gap between the proposed acquisition price and the actual stock price has steadily gotten wider, which suggests the market is increasingly skeptical the merger will go through as proposed. As a consequence, valuations for SIMO have dropped as shown in the table below and are now way below where they are supposed to be according to the agreement. The stock is at around $70, the lowest price point since the merger was announced, having lost 26% YTD. SIMO MXL Market cap $2.43B $2.74B Enterprise value $2.25B $2.79B Revenue (“ttm”) $1,012.9M $1,021.6M EBITDA $290.9M $224.3M Trailing P/E 10.81 27.03 Forward P/E 9.89 18.71 P/S 2.37 2.60 P/B 3.60 4.74 EV/sales 2.22 2.73 Trailing EV/EBITDA 7.73 12.44 Forward EV/EBITDA 7.00 6.96 Source: SeekingAlpha There was some good news on August 31 when SIMO shareholders voted to approve of the merger with MXL, but the stock still sold off after both companies announced that China requested they refile their application for regulatory approval using the normal procedure, in effect denying their earlier request to fast track approval using a simplified filing on July 6. SIMO and MXL hoped to complete their merger in the first half of 2023 and they still expect a final determination from China in the second or third quarter of 2023, but the latest decision from China puts the merger in limbo since regulators in China are under no time limits to come to a verdict on the proposed merger. China could do what it did in the case of the failed acquisition of Kokusai Electric by Applied Materials (AMAT), which is to let time pass by sitting on its hands and stonewalling, not giving approval, but not rejecting anything either. Why time is against the proposed merger between MXL and SIMO The merger can technically still go through as China has not officially rejected it, but the latest developments should come as music in the ears of those who are against the merger for whatever reason. At the very least, the transaction will need more time to complete than if China had approved of the use of the faster procedure. This could turn out to be problematic. The more time it takes to finish the transaction, the more likely it is to encounter a problem. The delay may even turn out to be death knell for the proposed merger for reasons that SIMO and MXL have no control over. For starters, while the semiconductor market is growing, it is also slowing down. Recent industry forecasts predict growth in the semiconductor market will decelerate from 26.2% in 2021 to 13.9% in 2022 and only 4.6% in 2023. Semis should be concerned by the fact that demand is faltering. Furthermore, weakening demand is even more pronounced in certain market segments, especially as it relates to PC and smartphone demand. Various companies like Intel (INTC), Micron (MU) and Samsung (SSNLF) have made this clear in their latest earnings outlook. This is especially problematic for a company like SIMO since it is heavily exposed to the PC and smartphone market. In fact, MU and INTC are SIMO’s biggest customers according to the most recent Form 20-F. This slowdown, including at key customers, means the quarterly numbers are likely to get worse for SIMO in the near term as time goes by. It is therefore important for SIMO that the merger is completed as soon as possible as time is not on its side. China taking its time to move forward does not help in this regard. (GAAP) Q2 FY2022 Q1 FY2022 Q2 FY2021 QoQ YoY Revenue $252.373M $241.978M $221.103M 4.30% 14.14% Gross margin 52.9% 52.1% 50.3% 80bps 260bps Operating margin 26.6% 27.4% 27.3% (80bps) (70bps) Operating income $67.115M $66.362M $60.438M 1.13% 11.05% Net income $51.583M $54.502M $49.545M (5.36%) 4.11% EPADS $1.55 $1.60 $1.42 (3.12%) 9.15% (Non-GAAP) Revenue $252.373M $241.978M $221.103M 4.30% 14.14% Gross margin 53.0% 52.2% 51.0% 80bps 200bps Operating margin 30.5% 29.8% 29.2% 70bps 130bps Operating income $76.957M $72.032M $64.481M 6.84% 19.35% Net income $62.754M $58.945M $52.730M 6.46% 19.01% EPADS $1.88 $1.72 $1.50 9.30% 25.33% Source: SIMO Form 6-K Why MXL could be forced to walk away from SIMO Keep in mind that MXL made its offer, which valued SIMO at $3.8B, at a time when earnings numbers greatly benefited from the semiconductor boom of the last few years. The quarterly numbers still show healthy growth as shown above, but the pace of growth has come down compared to say last year. The balance sheet has also taken a hit from SIMO spending its cash on dividends and stock buybacks. Furthermore, the numbers are highly likely to get worse for SIMO, which means SIMO would do well to complete the merger while the going is still relatively good. Remember that while SIMO has done well recently, it was not always like this. There have been plenty of times when SIMO struggled. The numbers from the last couple of years are more like an anomaly than business as usual. A trip back in history shows that recent quarterly numbers are atypical. For instance, revenue has grown at a CAGR of 30.5% in the last three years, but this goes down to 14.5% in the last ten years. Similarly, EBITDA has grown at a CAGR of 17.2% in the last ten years, but much faster at 49.9% in the last three years. SIMO is still benefiting from being on an upswing, but for how much longer remains to be seen. This is why SIMO needs to close the deal as quickly as possible. If the numbers get worse for SIMO, SIMO becomes less attractive to MXL, especially at the proposed acquisition price. MXL may even feel that it is overpaying for an asset that is losing value with the semiconductor market heading for a slump and earnings likely to drop as a result. Note that the market for NAND controller chips is fairly crowded with many players, which suggests very stiff competition in a downturn with everyone fighting for market share, making it extra hard for everyone to stay out of the red. SIMO should not expect to receive the same valuations it got during the boom years if earnings are much less in a downturn. In addition, MXL will use mostly debt to finance the SIMO acquisition, but this could become problematic as time goes by. Interest rates, for example, are going up due to Fed policies, which are designed to make debt and leveraging yourself more costly. The longer MXL has to wait to issue debt, the higher the interest rate is likely to be. MXL may have to decide whether leveraging yourself shortly before a possible recession is such a wise move or if it could backfire on the company. MXL has stated that it took a potential downturn into account when it decided to acquire SIMO, but it’s worth asking if MXL will still feel that way if or when the semiconductor market and the overall business environment deteriorates, certainly in comparison to earlier in the year when the deal was contemplated. If the semiconductor market goes into a deep slump, there may even come a point at which time it makes more business sense for MXL to walk away rather than complete the transaction as proposed. Investor takeaways A previous article concluded that the proposed merger between SIMO and MXL would face its greatest challenge in China. This has turned out to be the correct assessment with the proposed merger gaining U.S. antitrust approval and the subsequent approval by SIMO shareholders. It now comes down to regulatory approval from China if the merger is to go ahead.

Aug 31

Silicon Motion shareholders approve acquisition by MaxLinear

Silicon Motion Technology (NASDAQ:SIMO) shareholders have approved its merger deal with MaxLinear (NASDAQ:MXL). In early May, MaxLinear (MXL) confirmed it agreed to purchase Silicon Motion (SIMO) for about $3.8B, or $114.34 in stock and cash. Pursuant to the deal, Silicon Motion (SIMO) holders will receive $93.54 in cash and 0.388 shares of MaxLinear (MXL) common stock per ADS, for total consideration of $114.34. The remaining requirements for closure of the transaction are customary closing conditions set forth in the merger agreement, including approval from the State Administration for Market Regulation of the People's Republic of China. As previously announced, the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, has expired with respect to the proposed acquisition.

Shareholder Returns

SIMOUS SemiconductorUS Market
7D2.5%1.3%1.0%
1Y0.8%-24.2%-20.0%

Return vs Industry: SIMO exceeded the US Semiconductor industry which returned -24.2% over the past year.

Return vs Market: SIMO exceeded the US Market which returned -20% over the past year.

Price Volatility

Is SIMO's price volatile compared to industry and market?
SIMO volatility
SIMO Average Weekly Movement3.9%
Semiconductor Industry Average Movement7.8%
Market Average Movement6.8%
10% most volatile stocks in US Market15.5%
10% least volatile stocks in US Market2.8%

Stable Share Price: SIMO is less volatile than 75% of US stocks over the past 3 months, typically moving +/- 4% a week.

Volatility Over Time: SIMO's weekly volatility (4%) has been stable over the past year.

About the Company

FoundedEmployeesCEOWebsite
19951,434Wallace Kouhttps://www.siliconmotion.com

Silicon Motion Technology Corporation, together with its subsidiaries, designs, develops, and markets NAND flash controllers for solid-state storage devices. It offers controllers for computing-grade solid state drives (SSDs), which are used in PCs and other client devices; enterprise-grade SSDs used in data centers; eMMC and UFS mobile embedded storage for use in smartphones and IoT devices; flash memory cards and flash drives for use in expandable storage; and specialized SSDs that are used in industrial, commercial, and automotive applications. It markets its controllers under the SMI brand; enterprise-grade SSDs under the Shannon Systems brand; and single-chip industrial-grade SSDs under the Ferri SSD, Ferri-eMMC, and Ferri-UFS brands.

Silicon Motion Technology Corporation Fundamentals Summary

How do Silicon Motion Technology's earnings and revenue compare to its market cap?
SIMO fundamental statistics
Market CapUS$2.38b
Earnings (TTM)US$222.14m
Revenue (TTM)US$1.01b

10.7x

P/E Ratio

2.4x

P/S Ratio

Earnings & Revenue

Key profitability statistics from the latest earnings report
SIMO income statement (TTM)
RevenueUS$1.01b
Cost of RevenueUS$497.48m
Gross ProfitUS$515.47m
Other ExpensesUS$293.32m
EarningsUS$222.14m

Last Reported Earnings

Jun 30, 2022

Next Earnings Date

n/a

Earnings per share (EPS)6.45
Gross Margin50.89%
Net Profit Margin21.93%
Debt/Equity Ratio0.0%

How did SIMO perform over the long term?

See historical performance and comparison

Dividends

2.9%

Current Dividend Yield

28%

Payout Ratio