SMART's Diversification Strategy Paying Off Through the Trough, Analyst Says

Rosenblatt analyst Kevin Cassidy maintained SMART Global Holdings, Inc SGH with a Buy and cut the price target from $45 to $38.
SGH’s diversification strategy is paying off in maintaining profitability while its highest gross margin business, Cree LED, and lowest gross margin business, Brazil Memory, work through a significant weakening in demand.
Offsetting the weakness was 52% sequential growth in IPS revenue and steady demand for Specialty Memory.
Also Read: SMART Analyst Slashes Price Target By 25% Citing Macro Challenges In LED & Memory Segments
Looking out to the November quarter, there is more of the same mix, including an extra $35 million - $40 million for IPS from newly acquired Stratus Technologies.
Stratus will likely lift the non-GAAP gross margin by 200bps in the quarter.
In his view, the more cyclical exposed businesses, LED and Brazil, are at trough levels while the secular businesses, IPS and Specialty Memory, keep the company well positioned for long-term profitable growth.
Price Action: SGH shares traded lower by 6.23% at $15.95 on the last check Wednesday.