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Why SMART Global Holdings, Inc. Stock Popped 43.5% in March

By Keith Noonan – Apr 9, 2018 at 4:50PM

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The memory-chip company's shares have climbed more than 200% since its initial public offering last May.

What happened

SMART Global Holdings (SGH) stock rose 43.5% in March, according to data provided by S&P Global Market Intelligence.

The stock gains correlated with SMART's announcement that its executive chairman, Ajay Shah, would become the company's new CEO, replacing Iain MacKenzie after a transitional period. This was followed by a strong second-quarter earnings release and a fresh round of favorable ratings coverage.

SGH Chart

SGH data by YCharts

So what

On the heels of announcing Shah as the company's new chief executive, the stock received a round of positive coverage from ratings firms. The company reported second-quarter earnings on March 22, delivering an 83% year-over-year revenue increase to reach $314 million in sales for the period and gross profit climbed 96% to hit $73 million. These top and bottom-line results both came in well above the average analyst estimates.

Jefferies and Roth Capital both gave the stock a "buy" rating on March 22. Stifel Nicolaus published a note on the company the next day, reaffirming its "buy" rating on the stock and issuing a $56 price target, and Barclays Capital issued an "overweight" rating the same day.

A RAM computer memory chip.

Image source: Getty Images.

Now what

SMART sees favorable demand trends for its memory solutions -- particularly in the storage and networking segments. The company also sees favorable economic trends in Brazil, its home market -- which accounted for 66% of sales last quarter. Shares trade at roughly seven times forward earnings and 0.8 times forward sales.  

Keith Noonan 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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