Why Shares of Senomyx Inc. Dropped Today

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 Senomyx (NASDAQ: SNMX  ) dropped as much as 10.6% today after releasing first-quarter results.

So what: Revenue was up 9.3% from a year ago, to $8.2 million, but the company still lost $2 million, or $0.05 per share. Results easily topped expectations, but guidance fell short. 

Management expects fiscal 2014 revenue of $32 million to $35 million, below the $35.1 million estimate, and an expected loss of $0.23 to $0.28 per share was at the low end of expectations.

Now what: The sell-off was driven by weaker-than-expected guidance numbers and the realization that shares may have gotten ahead of themselves after the Pepsi announcement. Long term, I don't see any reason to change your investment thesis, but shares can be volatile in a stock where so much growth is priced in. That risk is why I'll stay out of shares, and wait for more commercial agreements and revenue before jumping in.

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