Why Semtech Stock Just Crashed 20%

A boardroom brawl just resulted in the ouster of Semtech’s CEO — one day after the company reported a big net loss.

With Semtech stock valued at $2.5 billion, burning cash, carrying $1.2 billion in net debt, and still a year away from profitability, it’s hard to call this stock a buy today.

That’s how I concluded my write-up of Semtech‘s (SMTC -17.90%) earnings report yesterday — with a caution to investors not to buy the Internet-of-Things stock despite its apparently strong earnings beat. Little did I know how bad things would get — and how fast.

This morning, Semtech announced CEO Paul Pickle is leaving the company, effective… yesterday.

Effective today, Semtech stock is down 19.7% through 11:50 a.m. ET.

Semtech’s CEO switcheroo

Semtech described Pickle’s departure as resulting from “differences between the Board and Mr. Pickle on how the CEO and the Board should work together in the best interests of stockholders.”

More good news: “Mr. Pickle’s departure is unrelated to Semtech’s operational or financial performance, did not involve a violation of the Company’s code of conduct, and does not have an impact on any previously reported financial statements.” So at least investors needn’t worry about an earnings restatement in the offing, and they can still rely on the company’s guidance given yesterday:

The company still expects to reverse its Q1 loss and report a profit of between $0.06 and $0.12 per share in Q2.

Is Semtech stock a sell?

Still, this probably also means that analyst forecasts for Semtech to lose money this year, and only turn full-year profitable again in 2025, remain in effect as well. For this reason, I’d still say the stock looks more like a sell than a buy.

If there’s any good news in this announcement, it’s that at least Semtech isn’t CEO-less. The company quickly tapped board member Hong Q. Hou to become its new president and CEO. Furthermore, this seems a permanent move — not interim.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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