Check out the latest SMART Global Holdings earnings call transcript.

What happened

Shares of SMART Global Holdings (NASDAQ:SGH) are having a bad day today. The stock is trading 27% lower as of 2:10 p.m. EST, and that's a rebound from a 29.5% drop earlier in the session. The maker of specialty computer memory solutions reported first-quarter results Tuesday evening that fell short of Wall Street's earnings estimates.

So what

SMART's first-quarter revenue rose 48% above the year-ago result to $394 million. Adjusted earnings increased by 51% to stop at $1.75 per diluted share. Your average financial analyst had been looking for earnings near $1.77 per share on sales in the neighborhood of $383 million, so this was a mixed bag.

Looking ahead, management centered their second-quarter earnings target at roughly $0.75 per share on revenue near $318 million. Here, analysts were hoping for much better results across the board. The current Wall Street consensus points to second-quarter earnings of approximately $1.32 per share on $328 million in sales.

A loose pile of burned and broken computer chips.

Image source: Getty Images.

Now what

The soft second-quarter guidance springs from "increased seasonality" in SMART's Brazilian business, while all other segments are showing solid results in the currently ongoing quarter. Moreover, mobile devices in Brazil will need to contain at least 50% locally produced memory chips in 2019, down from the previously expected 60% minimum. That regulatory change will make it tougher for SMART to sell through its memory production volumes at full-speed operation. Brazilian trends make a big difference to SMART, as that market accounted for 51% of the company's total sales in the first quarter.

SMART's investors have now taken a 36% haircut in 52 weeks and the stock is trading at just 4.5 times trailing earnings or three times forward projections. If seasonality really is the main cause of the next quarter's weakness, the sudden price drop we saw today should look like a silly knee-jerk reaction when the seasonal trends turn upward in Brazil.