MACOM Stock: 5G Play Has Tremendous Upside Potential in 2021

MTSI Stock Trading Near Record Levels on Strong Q4 Results

MACOM Technology Solutions Holdings Inc (NASDAQ:MTSI) is a great 5G infrastructure stock that continues to trounce the broader market. But few seem to be discussing its tremendous long-term growth potential around the water cooler or kitchen sink.

I last wrote about MACOM stock back in October, when it was trading around $36.00. It has made some serious moves since then. Currently trading at $61.12, MTSI stock is up 11.0% since the start of January and 125.4% year-over-year. It’s also up approximately 70% since I wrote about it in October.

There’s a good reason for that investor optimism about MACOM stock. The rollout of 5G technology is pretty much immune to the coronavirus or anything else. That explains why the company reported strong third- and fourth-quarter financial results—and provided a robust outlook for 2021.

Chart courtesy of StockCharts.com

MTSI Stock Overview

MACOM designs and manufactures semiconductor products for data center, telecommunications, industrial, and defense applications throughout North America, Europe, and Asia. (Source: “About Us,” MACOM Technology Solutions Holdings Inc, last accessed January 13, 2021.)

The company’s radio frequency (RF), microwave, millimeterwave, and lightwave spectrum products get added to various electronic systems, including wireless base stations, high-speed optical networks, active antenna arrays, radar, and medical systems.

Q4 Revenue Up 31%, Net Income Up 66%

On November 5, MACOM announced that its revenue for the fourth quarter of fiscal 2020, ended October 2, increased 31.2% year-over-year to $147.2 million. That was near the top end of the company’s guidance. (Source: “MACOM Reports Fiscal Fourth Quarter and Fiscal Year 2020 Financial Results,” MACOM Technology Solutions Holdings Inc, November 5, 2020.)

MACOM’s net income was $17.5 million ($0.22 per diluted share) in the fourth quarter. That was a big improvement from the net loss of $25.0 million ($0.37 loss per diluted share) in the third quarter. It was also a 66% increase over the net income of $10.5 million ($0.16 per diluted share) in the fourth quarter of 2019.

In fiscal 2020, the company’s revenue  was up 6.1% year-over-year, at $530.0 million.

MACOM reported a full-year net loss of $46.1 million ($0.69 loss per share) for fiscal 2020, compared to a net loss of $383.8 million ($5.84 loss per share) in fiscal 2019.

Business Outlook

For the first quarter of fiscal 2021, ending January 1, MACOM Technology Solutions Holdings Inc expects to report:

• Revenue in the range of $146.0 to $150.0 million, for year-over-year growth between 22% and 26%
• Adjusted gross margin between 56% and 58%, compared to 48% in the first quarter of fiscal 2020
• Adjusted earnings per share between $0.41 and $0.45, up from $0.07 in the first quarter of fiscal 2020

Analyst Take

MACOM Technology Solutions Holdings Inc is a great 5G company that continues to report solid financial results and provide a solid outlook. It has also rewarded investors with strong capital gains.

The company’s momentum should continue in 2021 as the rollout of 5G and demand for semiconductor products ramps up over the coming quarters. That bodes well for the future of MACOM stock.