Why EZchip Shares Tanked

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 fabless semiconductor company EZchip Semiconductor (Nasdaq: EZCH  ) plummeted 25% on Wednesday after issuing particularly disappointing guidance.

So what: EZchip's second-quarter results managed to top estimates -- adjusted EPS of $0.29 versus the consensus of $0.26 -- but downbeat short-term guidance is forcing analysts to lower their price targets on the stock. Management said that carriers are likely to keep capital expenditures low in the second half of 2012 amid the weak global economy, giving short-term-oriented investors little reason to stick around.

Now what: For the full year, management expects revenues to decline significantly year over year from $63.5 million, versus Wall Street's view of $69.1 million. "We continue to believe in our long-term, strong growth potential and are now expecting the revenue ramp to start in 2013," CEO Eli Fruchter reassured investors. "It is a very disappointing short term guidance that delays our expected revenue ramp, but we believe it is just a delay that does not change our long term view." With the stock hitting a 52-week low today, now might be an opportune time for patient Fools to buy into that bullishness.  

Interested in more info on EZchip? 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.

We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy always gets a perfect score.

Read/Post Comments (0) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1977378, ~/Articles/ArticleHandler.aspx, 10/22/2016 8:18:18 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 11 hours ago Sponsored by:
DOW 18,145.71 -16.64 -0.09%
S&P 500 2,141.16 -0.18 -0.01%
NASD 5,257.40 15.57 0.30%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

12/31/1969 7:00 PM
EZCH.DL $0.00 Down +0.00 +0.00%
EZchip Semiconduct… CAPS Rating: ****