What Happened:
Shares of semiconductor testing company FormFactor (NASDAQ:FORM) fell 7.28% in the morning session after the company reported first-quarter results that exceeded analysts' revenue, operating income and earnings per share (EPS) expectations. However, free cash flow missed, and inventory levels rose. In addition, revenue and EPS guidance for the next quarter were below Consensus estimates, and management highlighted the "focus on carefully balancing disciplined cost control and investments as the cyclical downturn continues." The cautious commentary likely weighed on the stock since it adds uncertainty to near-term financial projections.
What is the market telling us:
FormFactor's shares are somewhat volatile and over the last year have had 19 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 was about 1 month ago, when the company dropped 8.95% on the news that analyst Atif Malik of Citigroup downgraded the stock's rating from Buy to Neutral (Hold). The analyst noted that the prospects for memory probe demand could be dimmed by the persistent challenges in the Chinese domestic memory market, which would curb any increase in multiples.
FormFactor is up 18.1% since the beginning of the year, but at $25.87 per share it is still trading 38.7% below its 52-week high of $42.17 from June 2022. Investors who bought $1,000 worth of FormFactor's shares 5 years ago would now be looking at an investment worth $2,100.
Is now the time to buy FormFactor? Access our full analysis of the earnings results here, it's free.