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IBD 50 Chipmaker SiTime Delivers Accelerating Sales, Earnings Growth

Chipmaker SiTime (SITM) is on a roll as more customers switch to its silicon-based timing devices from legacy quartz crystal timing devices. As a result, SiTime stock has soared.




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The Santa Clara, Calif.-based company has posted four straight quarters of accelerating sales and earnings growth.

Chief Executive Rajesh Vashist told Investor’s Business Daily that SiTime has benefited from recent component shortages that spurred new customers to consider its devices.

“When customers could not get products in timing, they found SiTime,” Vashist said. The situation likely accelerated its revenue growth plans by a year, he said.

SiTime Stock In Record High Territory

SiTime specializes in making micro-electromechanical systems, known as MEMS, for timing devices in a host of electronics. Timing devices synchronize the activities of various chips in a system.

SiTime stock is trading in record high territory after the company’s second-quarter earnings report. On Monday, shares notched an all-time high of 214.90 before retreating.

On the stock market today, SiTime stock inched up 0.9% to 203.93. SiTime stock went public in November 2019 at $13 a share.

In the second quarter, SiTime earned an adjusted 46 cents a share on sales of $44.5 million. In the year-earlier period, it lost 14 cents a share on sales of $21.5 million.

Small Chipmaker Has Big Ambitions

“Precision timing, which is what we do, is very key in networking, telecommunications, 5G, automated driving, satellites, watches and Internet of Things,” he said. “We’re trying to disrupt a 70-year-old market.”

SiTime has three customer segments: The Mobile, IoT and Consumer segment includes high-volume, lower-cost devices for products like smartphones and fitness trackers. The Communications and Enterprise segment includes networking, telecom and data center products. And the Industrial, Automotive and Aerospace segment includes chips for electric vehicles, satellites, missiles and more.

The transition from quartz to silicon-based timing devices could take 12 to 15 years, Vashist said. But the transition is accelerating.

The company today has about 15,000 to 20,000 customers. Five years ago, it had 1,000 customers. SiTime makes about 150 products for some 350 applications.

SiTime is small but has big ambitions. Analysts expect the company to generate $202 million in revenue this year.

“Think of us as a TI or an Analog Devices in the making,” Vashist said. Texas Instruments (TXN) is forecast to have annual sales of $17.9 billion this year. Analog Devices (ADI) is seen posting $6.9 billion in revenue this year.

SiTime Stock On IBD 50 List

Chief Financial Officer Art Chadwick told IBD that SiTime’s financial model has improved substantially over the last couple of years.

When SiTime went public, its gross profit margin was about 47%. Now, it’s above 60%.

Operating margins also have improved. SiTime was in a loss position the year it went public. But now it is targeting operating margins of 25% to 30% in the third and fourth quarters.

“We’ve made huge progress in not only the top line but in improving our gross margins and our operating margins,” Chadwick said.

SiTime is a spinoff of Japanese semiconductor company MegaChips, which still owns about 30% of SiTime.

SiTime stock ranks No. 28 on the IBD 50 list of top-performing growth stocks.

Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.

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