What Happened:
Shares of semiconductor photomask manufacturer Photronics (NASDAQ:PLAB) fell 16.6% in the pre-market session after the company reported first-quarter results with revenue (-5% y/y), EBITDA, and EPS, all missing analysts' estimates as demand was weaker than expected. The company attributed some of the weakness to business headwinds related to temporary soft demand following the Chinese New Year holiday (Order rates are paused during the Lunar New Year) and the impact from earthquakes in Taiwan beginning in early April. PLAB added that order rates recovered at a slower rate than expected. Adding more color to the impact from the earthquakes in Taiwan, the company noted that it caused a loss of production across both IC (integrated circuit) and FPD (flat panel display) segments, resulting in an approximately $3 million revenue impact. Looking ahead to Q2, its revenue guidance was in line, while its EPS outlook fell short. Overall, the results could have been better.
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What is the market telling us:
Photronics's shares are very volatile and over the last year have had 14 moves greater than 5%. But moves this big are very rare even for Photronics and that is indicating to us that this news had a significant impact on the market's perception of the business.
The biggest move we wrote about over the last year was 3 months ago, when the stock dropped 16% on the news that the company reported first quarter results with revenue, EBITDA, and EPS missing analysts' estimates as demand was weaker than expected. The I.C. (integrated circuits) segment grew 1% year on year and was down 4% sequentially. FPD (flat display panels) revenue rose 8% year on year, but fell 7% sequentially. While demand for High-end I.C.s improved, the company noted that demand for High-end FPD was impacted by seasonality. Though management provided some encouraging insights, adding that " typically lower seasonal demand was weaker than anticipated, especially in the beginning of the quarter. Order rates improved through the quarter, continuing into the second quarter." Looking ahead to Q2, the company's revenue guidance was in line, while its EPS outlook fell short. Overall, the results could have been better.
Photronics is down 14.1% since the beginning of the year, and at $26.55 per share it is trading 21.6% below its 52-week high of $33.84 from February 2024. Investors who bought $1,000 worth of Photronics's shares 5 years ago would now be looking at an investment worth $2,970.
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