Investing.com -- Shares of FormFactor (NASDAQ:FORM) fell sharply by 27% today after the semiconductor company released its fourth-quarter earnings report and provided guidance for the first quarter of 2025 that fell short of analysts’ expectations. The company’s forecast prompted a downgrade from an analyst, contributing to the stock’s decline.
FormFactor reported fourth-quarter earnings per share (EPS) of $0.27, which was $0.02 below the consensus estimate. Revenue for the quarter was $189.5 million, slightly missing the consensus estimate of $190.12 million. While the company’s revenue for the fourth quarter marked a 12.7% increase from the $168.2 million reported in the same quarter last year, the market reacted negatively to the company’s outlook for the coming quarter.
For the first quarter of 2025, FormFactor expects EPS to be in the range of $0.15 to $0.23, significantly below the consensus estimate of $0.33. The company also anticipates first-quarter revenue to be between $165 million and $175 million, which is lower than the expected $192.93 million.
The company’s press release highlighted a 15.2% increase in fiscal year 2024 revenue, reaching $764 million up from $663 million in fiscal year 2023. This growth was attributed to a significant rise in High Bandwidth (NASDAQ:BAND) Memory (HBM) revenue, driven by the adoption of Generative AI, despite weaker demand in high-unit-volume markets such as PCs and mobile handsets. Additionally, FormFactor announced the acquisition of a minority interest in FICT Limited, a supplier of advanced probe card components, which is not expected to materially impact the company’s operations.
Despite these positive developments, the company’s outlook for the first quarter reflects continued challenges. B.Riley analyst Craig Ellis downgraded FormFactor from Buy to Neutral with a price target of $34.00, reduced from $64.00. Ellis’s comments highlight the company’s struggles with weak PC and smartphone markets affecting probe card demand, leading to a gross margin retreat. Ellis also noted that a major Foundry/Logic customer, presumed to be Intel Corp . (NASDAQ:INTC), is performing below norms, adding uncertainty to the recovery’s timing and potential magnitude.
The analyst’s full comment is as follows: "FORM cited unusually weak PCs and smartphones as probe card demand culprits, and lower volume triggers a GM retreat back into the high 30s. We’ve observed high-volume application weakness but also believe large Foundry/Logic customer INTC is tracking well below norms and now with uncertain recovery timing and magnitude potential."
Investors are reacting to the combination of a subdued earnings report and a cautious outlook, leading to today’s significant drop in FormFactor’s stock price.
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