Deutsche Bank analysts shared their views on SMART Global Holdings, Inc. (NASDAQ:SGH) ahead of the upcoming Q2/23 earnings announcement on April 4, highlighting near-term risks.
The analysts expect the company to report in line quarterly results, with strength in Intelligent Platform Solutions (IPS) offsetting weakness in Memory and LED. That said, Q3 guidance could come in below the Street estimates, with risks to all three businesses.
The analysts noted that IT hardware peers have guided conservatively for Q2 citing more cautious budgets and lengthening sales cycles, although AI/HPC is a bright spot which is the company’s focus. In addition, memory pricing remains challenging, while slow economic growth could delay inventory depletion in the LED market.
Despite increasing macro headwinds in the near term, analysts expect the company to focus on things it can control, by improving gross margin and increasing the mix of recurring service revenues, especially in the IPS business, and hence its EPS should be more resilient than in past cycles.