RF Micro Shares Plunged: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of chip maker RF Micro Devices (Nasdaq: RFMD  ) plummeted 20% on Friday after the company lowered its third-quarter revenue guidance.

So what: RF Micro's cut was so big -- the company now sees quarterly revenue of $225 million versus its prior forecast of $250 million -- that analysts are being prompted to lower their valuation estimates yet again. The stock has been crushed over the past year on European demand concerns, but management cited a sharp drop in Chinese 2G orders as the main culprit this time, triggering a fresh new set of fears among investors.

Now what: I'd look into this pullback as a possible entry point. "Despite this challenging macro environment, [RF Micro] is winning new business," CEO Bob Bruggeworth said, "and we fully expect to grow in fiscal 2013, supported by market share gains, new product launches, and expanding relationships with both channel partners and customers." Best of all, with the stock now down 32% over the past three months alone and sporting a cheapish forward P/E of 7.8, that long-term optimism doesn't exactly come at a premium.

Interested in more info on RF Micro? Add it to your watchlist.

Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Try any of our Foolish newsletter services free for 30 days.

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  • Report this Comment On January 07, 2012, at 11:54 AM, bionicbanker wrote:

    I always love when the 90-day, hot money, high frequency, hedge fund wonders get some piece of news and take a stock down 15%, 20% or 25% in an hour because of things like a few pennies miss on inflated whisper number earnings. This is not investing. It is trading and manipulation. Sure, if the news is material to the future prospects of the company, such a drop may be justified. RFMD makes products for the future. They are geared toward the right industries. They continue to earn money and generate cash flow. Everyone knows and has known that world economies are in a slump. Does a 10% drop in sales forecasts justify a 32% drop in equity price? Institutional investors may be forced to dump because the stock price fell below $5. For long-term "investors" this is an entry point.

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