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Why Smart Global Stock Was Winning This Week

Motley Fool - Fri Jun 16, 2023

What happened

Semiconductor maker Smart Global Holdings(NASDAQ: SGH) has been a smart stock to buy over the past few days.

Its price had risen almost 13% week to date as of early Friday morning, according to data compiled by S&P Global Market Intelligence. The company operates in a popular segment now, as advanced semiconductors are associated with artificial intelligence (AI), plus several analysts recently raised their price targets on its stock. Oh, and it also announced the divestment of a South American subsidiary.

So what

Smart's bull week effectively started on Tuesday, when the company announced that it was selling 81% of Brazilian unit Smart Modular Technologies do Brasil-Industria e Comercio de Componentes. The buyer is Lexar Europe, and the price is roughly $166 million. The deal will be in cash.

In the press release about the sale, Smart Global quoted its CEO, Mark Adams, as saying that it "will strengthen our financial position, enabling us to increase our strategic investments into domestic research and development, and U.S.-based production of advanced technologies."

Investors like the sound of that. They also liked the fact that, following the announcement, no less than four analysts upped their price targets on the semiconductor stock.

Now what

Exactly half of those prognosticators set a new Smart price target at $30 per share and maintained the equivalent of buy ratings. The two like-minded pundits were Jefferies' Mark Lipacis and Barclays' Tom O'Malley; previously, their prices had been $19 and $20, respectively.

The prize for highest new price target goes to Needham & Company's Rajvindra Gill, who now thinks Smart is worth $32, up from the preceding $25. Finally, there was Deutsche Bank's Sidney Ho with a $8 increase to $28.

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Smart Global. The Motley Fool has a disclosure policy.

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