Shares of semiconductor maker SMART Global Holdings (NASDAQ:SGH) jumped 10.6% in the morning session after the company reported first-quarter results, with EPS (earnings per share) outperforming Wall Street's estimates. While revenue missed by a small margin, full year revenue outlook was raised, which is a major positive. Notably, management called out a growing interest in the company's AI solutions. It gave an example of what it considers the first deployment in North America of oil-based immersion cooling for AI, which the company is developing for an energy conglomerate to "enable much lower and more efficient power consumption." Overall, this was a solid quarter, showing that the company is staying on track.
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What is the market telling us:
SMART's shares are quite volatile and over the last year have had 14 moves greater than 5%. But moves this big are very rare even for SMART 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 22.6% on the news that the company reported earnings that fell short of expectations in the wake of its divestiture of SMART Modular Brazil, of which it owned 81%. The divestiture was announced in June 2023. Divestitures sometimes lead to messy financials and unclear guidance in the near term, and SMART is no exception. This was the first quarter after the divestiture was announced, and hence, its revenue missed Wall Street's estimates and guidance underwhelmed. Overall, the results could have been better, and investors are likely confused/unsure about the company's future given the situation.
SMART is up 13.5% since the beginning of the year, but at $20.81 per share it is still trading 28.3% below its 52-week high of $29.01 from June 2023. Investors who bought $1,000 worth of SMART's shares 5 years ago would now be looking at an investment worth $1,718.
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