Shares of Inphi Corp. (IPHI) dropped on Wednesday following a mixed first-quarter report and a subsequent analyst downgrade. The company's revenue declined sharply and came in just short of analyst expectations. The stock was down about 9.5% at 2:45 p.m. EDT.
Inphi reported first-quarter revenue of $60.1 million, down 35.7% year over year and about $1.1 million below the average analyst estimate. The company blamed lower demand for linear transimpedance amplifier and linear driver products for the decline in revenue. Non-GAAP earnings per share came in at a loss of $0.05, down from a profit of $0.44 in the prior-year period and in line with analyst expectations.
Inphi President and CEO Ford Tamer believes that the worst may be over for the company, reiterating what he said in the fourth-quarter report in February: "We believe Q1 represented the bottom of a down cycle driven by inventory buildups in China long-haul and metro markets."
At least one analyst cooled a bit on the stock following the first-quarter report. Needham knocked Inphi stock down to "buy" from a previous rating of "strong buy." Its new price target of $35 per share is just 11% above the closing price on Tuesday.
Inphi expects to produce between $67.3 million and $71.3 million of revenue during the second quarter, along with non-GAAP earnings per share (EPS) between $0.12 and $0.14. While those ranges represent sequential improvements, both are down considerably from the second quarter of last year. At the midpoint, second-quarter revenue will decline by 17.9% year over year, while non-GAAP EPS will tumble 62.9%.
While Inphi's second quarter will be stronger than its first quarter, a return to year-over-year growth may still be a few quarters away.