What Happened:
Shares of semiconductor manufacturer Magnachip Semiconductor (NYSE:MX) jumped 16% in the morning session after the company reported second-quarter earnings results, which revealed strong gross margin improvement. Its EPS also outperformed Wall Street's estimates. Moving on, guidance was encouraging as next quarter's revenue guidance was also above expectations, rounding out a good quarter for the company.
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What is the market telling us:
Magnachip's shares are not very volatile than the market average and over the last year have had only 2 moves greater than 5%. Moves this big are very rare for Magnachip 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 5 months ago, when the stock dropped 15.9% on the news that the company reported fourth-quarter results, with revenue and gross margin falling below expectations. In addition, its full-year 2024 revenue and operating profit guidance fell short of Wall Street's estimates as the company announced it would transition its Gumi Fab from lower-margin Transitional Foundry Services products to higher-margin Power products. Magnachip announced that starting in Q1, it will begin reporting its results under two new business segments: MSS (Mixed-Signal Solutions) and PAS (Power-Analog Solutions). Its PAS segment is expected to have lower gross margins in 2024 during the transition period. Furthermore, the company's Display business will now focus on the Chinese OLED market. Overall, this was a tough quarter for Magnachip.
Magnachip is down 26.8% since the beginning of the year, and at $5.75 per share it is trading 38.8% below its 52-week high of $9.39 from July 2023. Investors who bought $1,000 worth of Magnachip's shares 5 years ago would now be looking at an investment worth $511.56.
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