Why Altera Shares Dropped

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 Altera (NASDAQ: ALTR  ) plunged 14% during intraday trading Wednesday after the company released mixed third-quarter results.

So what: Quarterly sales fell 10% year-over-year to $445.9 million, which translated to earnings which fell 24% to $0.37 per diluted share. For reference, while Altera's earnings actually beat expectations of $0.34 per share, sales fell short of analysts average estimates of $451.81 million.

Now what: Worse yet, Altera provided disappointing forward revenue guidance in the range of "minus 3% to plus 1%" -- or from $432.52 million to $450.36 million -- the midpoint of which is well below analysts' expectations for sales of $473.66 million.

To be sure, Altera shares don't look particularly expensive trading around 20.7 times last year's sales, and Altera does offer a solid 1.6% dividend to investors who are willing to wait for the business to turn around. That said, I wouldn't be surprised if the stock languishes from here, at least until the company can prove it has what it takes to resume sales growth. As it stands, I just don't think the stock is quite cheap enough yet to represent a compelling long-term investment.

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