Shares of semiconductor testing company FormFactor (NASDAQ:FORM) jumped 6.5% in the afternoon session after the company reported fourth-quarter results with revenue exceeding Wall Street's expectations, while EPS was in line. Gross margin also improved significantly during the quarter. On the other hand, its revenue guidance for next quarter slightly missed analysts' expectations, mainly driven by lower system segment revenues. Overall, this quarter's results still seemed fairly positive and shareholders should feel optimistic. After the initial pop the shares cooled down to $39.85, up 4.6% from previous close.
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What is the market telling us:
FormFactor's shares are somewhat volatile and over the last year have had 12 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 8 days ago, when the company dropped 5.4% as stocks retreated after the Federal Open Market Committee kept rates steady at 5.25% - 5.5% during the first policy meeting for 2024, in line with expectations. Fed Chair Jerome Powell also signaled no rate cuts during the next policy meeting in March 2024. He added, "The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2%." This threw some cold water on a market that has been strong over the last 6 months as investors have priced in rate cuts. However, rate cuts beyond March are still very much on the table so long as inflation doesn't get out of control and unexpectedly accelerate from current levels.
FormFactor is down 1.2% since the beginning of the year, but at $39.85 per share it is still trading close to its 52-week high of $43.75 from January 2024. Investors who bought $1,000 worth of FormFactor's shares 5 years ago would now be looking at an investment worth $2,611.
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