Critical Review: Tower Semiconductor (TSEM) versus Semtech Corporation (SMTC)

Tower Semiconductor (NASDAQ: TSEM) and Semtech Corporation (NASDAQ:SMTC) are both mid-cap computer and technology companies, but which is the superior investment? We will contrast the two businesses based on the strength of their institutional ownership, earnings, dividends, profitability, risk, valuation and analyst recommendations.

Insider & Institutional Ownership

49.2% of Tower Semiconductor shares are held by institutional investors. Comparatively, 94.4% of Semtech Corporation shares are held by institutional investors. 1.0% of Tower Semiconductor shares are held by company insiders. Comparatively, 2.1% of Semtech Corporation shares are held by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Analyst Recommendations

This is a breakdown of current recommendations for Tower Semiconductor and Semtech Corporation, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Tower Semiconductor 0 0 2 0 3.00
Semtech Corporation 0 1 6 0 2.86

Tower Semiconductor presently has a consensus price target of $31.50, suggesting a potential upside of 5.35%. Semtech Corporation has a consensus price target of $43.50, suggesting a potential upside of 22.88%. Given Semtech Corporation’s higher possible upside, analysts plainly believe Semtech Corporation is more favorable than Tower Semiconductor.

Risk and Volatility

Tower Semiconductor has a beta of 1.02, indicating that its share price is 2% more volatile than the S&P 500. Comparatively, Semtech Corporation has a beta of 1.45, indicating that its share price is 45% more volatile than the S&P 500.

Profitability

This table compares Tower Semiconductor and Semtech Corporation’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Tower Semiconductor 14.53% 28.28% 14.32%
Semtech Corporation 11.00% 11.77% 7.06%

Valuation & Earnings

This table compares Tower Semiconductor and Semtech Corporation’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Tower Semiconductor $1.34 billion 2.18 $417.31 million $1.95 15.33
Semtech Corporation $574.15 million 4.08 $116.22 million $0.95 37.26

Tower Semiconductor has higher revenue and earnings than Semtech Corporation. Tower Semiconductor is trading at a lower price-to-earnings ratio than Semtech Corporation, indicating that it is currently the more affordable of the two stocks.

Tower Semiconductor Company Profile

Tower Semiconductor Ltd. operates as an independent semiconductor foundry focused primarily on specialty process technologies. The Company focuses on producing integrated circuits (ICs) based on the design specifications of its customers. The Company manufactures semiconductors for its customers primarily based on third-party designs. It offers process manufacture geometries of 0.35, 0.50, 0.55, 0.60, 0.80-micron and above on 150 millimeter wafers, 0.35, 0.18. 0.16, 0.13 and 0.11-micron on 200 millimeter wafers, and 65 nanometer and 45 nanometer on 300 millimeter wafers. It also provides design support and technical services. The Company’s ICs are incorporated into a range of products in markets, including consumer electronics, personal computers, communications, automotive, industrial and medical device products. The Company has manufacturing facilities in the United States, Israel and Japan.

Semtech Corporation Company Profile

Semtech Corporation is a supplier of analog and mixed-signal semiconductor products. The Company designs, develops and markets a range of products for commercial applications, which are sold into the enterprise computing, communications, consumer and industrial end-markets. Its product lines include Signal Integrity, Protection, Wireless and Sensing, and Power and High-Reliability. Applications for the industrial market include video broadcast studio equipment, automated meter reading, wireless charging, military and aerospace, medical, security systems, automotive, Internet of Things, industrial and home automation, and video security and surveillance. Enterprise computing end-markets include desktops, notebooks, servers, graphic boards, printers, datacenter related equipment and passive optical networks. Communications end-market applications include wireless base stations, carrier networks, switches and routers, cable modems, signal conditioners and wireless local area network.

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