What Happened?
Shares of semiconductor photomask manufacturer Photronics (NASDAQ:PLAB) jumped 20.3% in the morning session after the company reported strong third-quarter results, which blew past analysts' EPS expectations, driven by revenue and profit outperformance vs Wall Street's estimates. The results marked a sharp rebound from the slower growth in the previous quarter. Revenue rose sequentially in the fourth quarter, fueled by stronger sales of Integrated Circuits (ICs) and Flat Panel Displays (FPDs). Notably, IC sales surged in the United States, while demand for FPDs showed steady growth across multiple regions. Guidance was also solid, with next quarter's revenue outlook ahead of expectations while EPS was in line, suggesting the improved trend will continue.
Overall, we think this was a good quarter, especially considering some of the uneven recent earnings performance across the sector.
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What The Market Is Telling Us
Photronics’s shares are quite volatile and have had 17 moves greater than 5% over the last year. But moves this big are rare even for Photronics and indicate this news significantly impacted the market’s perception of the business.
The biggest move we wrote about over the last year was 7 months ago when the stock dropped 16.6% on the news that 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 were 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.
Photronics is down 6.7% since the beginning of the year, and at $28.78 per share, it is trading 14.9% 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 $1,902.
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