Nordic Earnings: Sequential Sales Growth Expected; Long-Range Business Keeps Disappointing

Narrow-moat Nordic Semiconductor's recovery continues as the company is gradually exiting the cycle trough seen last quarter. For the second quarter, revenue reached $127.4 million, up 73% sequentially from the weak $73.6 million seen last quarter, and down 16% year over year. The recovery has been strong among all end markets as inventory levels at distributors decreased to normalized levels and orders started to return. Investors welcomed the healthy guidance for next quarter, with Nordic expecting revenue between $150 million and $170 million, an 11%-26% sequential improvement. Nordic’s performance can be lumpy among quarters due to its high exposure to consumer electronics and high revenue concentration, where the top-10 clients normally represent more than 50% of revenue. Sales in the second half of the year should remain stronger due to seasonal patterns, especially in the consumer segment with Black Friday and Christmas resulting in higher consumer sales. We are maintaining our fair value estimate of NOK 127.