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Why Silicon Laboratories Stock Dropped Today

By Steve Symington - Updated Apr 24, 2019 at 10:39PM

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The fablesss semiconductor company missed its Q4 guidance and offered an underwhelming forward outlook.

What happened

Shares of Silicon Laboratories ( SLAB -0.16% ) were down 13.4% as of 2:45 p.m. EST Wednesday after the fabless semiconductor specialist announced disappointing fourth-quarter 2018 results. 

Silicon Labs' revenue climbed 7.2% year over year to $215.5 million, translating into adjusted earnings of $40 million, or $0.91 per share. By comparison, the company's latest guidance (provided in October) called for revenue in the range of $221 million to $227 million, and earnings per share of $0.91 to $0.97.

Stock market data with a red line chart indicating losses

Image source: Getty Images.

So what

For perspective, recall three months ago Silicon Labs stock fell after the company's strong third-quarter report was overshadowed by what what CEO Tyson Tuttle described as "near-term turbulence in macro and regulatory environments as well as end markets." Given today's relative underperformance, it seems concern over that turbulence was well-founded.

Still, Tuttle insisted today that the company is "proud" of its performance over the past year.

"Despite current volatility, we remain confident about our longer-term ability to outperform the market," Tuttle added. "We are focused on executing on our product roadmaps and converting a large pipeline of opportunities into additional wins and share gains."

Now what

For the first quarter of 2019, Silicon Labs expects revenue in the range of $183 million to $193 million, with adjusted earnings per share between $0.42 and $0.52. Here again, the midpoints of both ranges were well below consensus estimates predicting first-quarter earnings of $0.82 per share on revenue of $219.5 million.

That doesn't mean Silicon Labs is a broken business. To the contrary, it still boasts an enviable position serving many promising end markets. But our stock market hates being effectively told to hurry up and wait, so it's no surprise to see shares falling in response today.

Check out the latest Silicon Labs earnings call transcript.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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