Why Photronics, Inc. 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 Photronics, Inc. (NASDAQ: PLAB  ) jumped more than 10% during intraday trading Wednesday after the semiconductor and flat panel display manufacturing specialist beat earnings expectations with its fiscal fourth-quarter 2013 results.

So what: Quarterly sales arrived in line with estimates at $106 million, which translated to adjusted earnings per share of $0.09. For reference, that exceeded the company's own guidance for adjusted earnings of just $0.06 to $0.07 per share, while analysts were modeling earnings of just $0.08 per share.

In addition, while Photronics declined to provide specific guidance for the coming year, CFO Sean Smith asserted during the subsequent conference call, "We do expect to see substantial growth as we move out into Q2, Q3." Specifically, that growth should come thanks, in part, to new opportunities from a recently announced joint venture to merge its Semiconductor Mask subsidiary with Taiwan-based Dai Nippon Printing.

Now what: Even with shares currently trading at just 11 times next year's estimated earnings, I'm still a little leery of the stock. Remember, even according to Smith, Photronics' mainstream business remains "in a market where the units are clearly decreasing," and the only reason revenue rose over last year this quarter is because Photronics is managing to take market share from competitors in that declining space.

Until Photronics proves it has what it takes to successfully seize additional, sustainable long-term markets going forward, you'll find me on the sidelines.

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  • Report this Comment On December 11, 2013, at 6:32 PM, JAVKO wrote:

    This shows absurdity/manipulation of the market as PLAB reduced guidance a few weeks ago. Then analysts reduced theirs accordingly. Now they beat on reduced analysts' estimates but below where it was before they reduced it, and the shares go up on such a down day!

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