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Why Shares of Acacia Communications Tumbled Today

By Timothy Green - Feb 23, 2018 at 1:29PM

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Weak demand continues to plague the optical interconnect company.

What happened

Shares of Acacia Communications (ACIA) slumped on Friday following the optical interconnect supplier's fourth-quarter report. A steep drop in revenue pushed the top line below analyst estimates, and the company's first-quarter guidance left a lot to be desired. Acacia stock was down about 16% at 12:35 p.m.

So what

Acacia reported fourth-quarter revenue of $86.6 million, down a whopping 39.2% year over year and about $1.8 million below the average analyst estimate. "While we continue to face some headwinds in the market, our fourth quarter 2017 results were in-line with our expectations," said Acacia CEO Raj Shanmugaraj.

Fiber-optic cables

Image source: Getty Images.

Non-GAAP (generally accepted accounting principles) earnings per share came in at $0.27, down from $0.94 in the prior-year period but $0.02 ahead of analyst expectations. The company posted a $0.52 per-share loss on a GAAP basis, mostly due to an $0.81 per-share impact from the U.S. Tax Cuts and Jobs Act.

Acacia CFO John Gavin sees signs that market conditions are improving this year, but the company is remaining cautious with its outlook.

Now what

Acacia expects to produce revenue between $67 million and $74 million in the first quarter of 2018, well below analyst expectations of $93.2 million. Non-GAAP EPS is expected to be between $0.01 and $0.10, dangerously close to negative territory.

Acacia's customer base is extremely concentrated, with its top five customers accounting for around 78% of revenue as of mid-2017. A single customer cutting back on orders could have an outsize effect on the company's top line. With Acacia's revenue plunging and no real sign that a turnaround is in the cards anytime soon, there was little to like about the company's report.

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