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Why Montage Technology Group Ltd. Shares Soared

By Steve Symington – Jan 9, 2014 at 4:04PM

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Is Montage Technology's spike meaningful? Or just another movement?

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Montage Technology Group, Ltd. (NASDAQ: MONT) jumped more than 15% Thursday after the company provided encouraging preliminary fourth-quarter revenue results.

So what: Fourth-quarter revenue is now expected to be in the range of $35 million to $35.5 million, significantly exceeding Montage's previous guidance for sales of $32 million to $34 million. Analysts, on average, were modeling Q4 sales of just $33.06 million.

To explain the increase, Montage says it has seen both higher sales of its memory interface solutions, as well as continued growth from its set-top box products in emerging markets like China. Specifically, revenue from set-top boxes and memory interface products are expected to rise sequentially by 10% and 80%, respectively.

Now what: Of course, it's also worth keeping in mind that Montage is working from a relatively small base, but those numbers are impressive no matter how you slice it. As a result, while shares may look relatively expensive trading around 31 times trailing earnings and more than five times sales, I think Montage could still reward patient investors, assuming it can maintain its growth over the long term.

Fool contributor Steve Symington has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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