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What Happened:
Shares of semiconductor maker SMART Global Holdings (NASDAQ:SGH) fell 21.9% in the morning session after the company reported first-quarter results with revenue narrowly missing Wall Street’s EPS expectations. Revenue guidance for the next quarter was also weak, falling below analysts’ expectations, and its operating margin shrunk. On the other hand, EPS came in ahead during the quarter while inventory levels improved.
During the earnings release, SMART appointed Pete Manca as President of its Intelligent Platform Solutions segment. Before joining, Manca was a Senior Vice President and General Manager at Dell Technologies (NYSE:DELL).
Overall, this was a mixed quarter for SMART, and the market was likely spooked by its weak outlook.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy SMART? Find out by reading the original article on StockStory.
What is the market telling us:
SMART’s shares are quite volatile and over the last year have had 17 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 6 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 11% since the beginning of the year, but at $20.31 per share it is still trading 30% 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 $1,837.
