Why FormFactor Inc. Shares Soared 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 FormFactor  (NASDAQ: FORM  ) soared 18% today after the chip-testing equipment maker raised its current-quarter guidance.

So what: The stock has slumped in recent months on concerns over slowing demand, but upbeat revenue and margin guidance for the second quarter is quickly easing those concerns. Management cited higher demand across the SOC and DRAM segments for the positive view, giving analysts a much better feeling about FormFactor's growth trajectory. 

Now what: Management now sees second-quarter gross margin of 34%-37% on revenue of $65 million-$69 million, well above its prior view of 31%-34% and $62 million-$66 million, respectively. "We continue to see strength in our business in both SOC and DRAM market segments," said Chairman and CEO Tom St. Dennis in a press release. "While we are encouraged by the strong momentum in our business, we remain focused on our longer term strategic initiatives that will drive growth beyond 2014." More important, with FormFactor still boasting a cash-rich balance sheet and forward P/E in the low teens, the downside remains limited enough to bet on those prospects. 

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