Earnings season can bring many surprises, writes Chris Lau on Kapitall.com, so should you keep an eye on these tech stocks?
When a stock falls 10% or more in a single day, investors should notice. A company may have had a bad quarter or may simply be ripe for profit-taking. Three tech stocks that fell by this magnitude after their recent earning reports merit further investigation.
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Heavy Reliance on Single Customer
InvenSense (INVN) makes motion sensors for consoles and tablets. It relies on Samsung (SSNLF) for over 30% of total revenue. The company guided third-quarter revenue and earnings lower than consensus.
InvenSense expects revenue to be $65-$68 million, with earnings as high as $0.18 per share. The consensus was $0.22 per share on revenue of $76.6 million. The trouble for InvenSense may be that it built up inventory, but did not yet have firm orders from console companies to include in its forecast.
Cirrus Logic (CRUS) also relies heavily on one customer: Apple (AAPL). Investors were disappointed that Cirrus lowered its gross margin forecast from 52% down to between 45%-47%. The current quarter was supposed to be the company’s strongest quarter.
Hazy Forecast
And Silicon Graphics (SGI) deferred providing guidance, giving investors a reason to sell shares. The company blamed a lack of clarity on expected government spending.
In its last quarter ended September 27, Silicon Graphics earned $0.04 per share, beating estimates by $0.02 per share. Revenue was $148 million.
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Conclusion
InvenSense investors likely expected new contract wins, but did not expect management to take a more conservative outlook for its business. Its underlying business remains healthy, and if future deals are on the horizon, they are not yet priced in the stock. Further price changes for InvenSense should be watched.
And uncertainty is elevated in the near-term future for Silicon Graphics. This makes the company hard to evaluate.
Meanwhile Cirrus Logic’s sell-off appears overdone. In the last four years, cash levels have been rising and revenue has grown steadily. The company relies heavily on Apple, but demand for Apple’s products remains healthy. This could be very good for Cirrus Logic and its shareholders.
Analyst ratings and price data sourced from Zacks Investment Research.
By Chris Lau of Kapitall.com
