Why Spreadtrum Shares Popped

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 Spreadtrum (NASDAQ: SPRD  ) have popped today by as much as 16% after the company boosted its guidance.

So what: Revenue in the second quarter is now expected in the range of $270 million to $278 million, which would represent an increase of 43% to 47% from a year ago. That's up significantly from the company's previous outlook of just $220 million to $228 million in sales, and gross margin is also expected to improve.

Now what: CEO Dr. Leo Li makes it clear what's driving that upside: low-cost smartphones. Spreadtrum continues to see strong demand from that market segment, and expects this to be the beginning of a multiyear cycle in the important Chinese smartphone market. Chinese consumers are still in the midst of transitioning from 2.5G feature phones to 3G smartphones, and Spreadtrum is poised to capitalize on that secular shift. Canaccord Genuity upgraded shares from "hold" to "buy" following the news.

Interested in more info on Spreadtrum? Add it to your watchlist by clicking here.

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