Please ensure Javascript is enabled for purposes of website accessibility

Why SMART Global Holdings Stock Plunged Today

By Steve Symington - Updated Apr 17, 2019 at 12:01PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The specialty memory leader's latest quarterly results left the market underwhelmed.

What happened

Shares of SMART Global Holdings (SGH -1.90%) were down 20.8% as of 12:30 p.m. EDT Friday after the specialty memory and storage solutions company announced mixed fiscal second-quarter 2019 results and disappointing guidance.

SMART Global's quarterly revenue declined 3.2% year over year to $304.1 million, translating into adjusted (non-GAAP) net income of $18 million, or $0.77 per share, down from $1.64 per share in the year-ago period. Analysts, on average, were expecting slightly lower adjusted earnings of $0.75 per share, but on significantly higher revenue of $317.3 million. 

Stock market chart with red arrow indicating losses

Image source: Getty Images.

So what

Still, SMART Global Chairman and CEO Ajay Shah stated the company "continues to execute well" despite a "challenging environment."

More specifically, SMART Global's top-line decline was driven entirely by its Brazil business, where net sales fell 29.5% year over year to $147.1 million -- roughly in line with management's expectations -- on a "worsening price environment" for commodity memory products in smartphones and PCs. Meanwhile, SMART Global's specialty memory segment saw sales increase 9.8% to $115.6 million, and specialty compute and storage solutions delivered sales of $41.3 million stemming from the company's acquisition of Penguin Computing last summer. 

"We have made good progress toward realizing synergies from our acquisition of Penguin Computing and remain focused on disciplined execution to drive our financial performance," added Shah.

Check out the latest earnings call transcripts for the companies we cover.

Now what

For the current third quarter of fiscal 2019, SMART Global expects net sales of $260 million to $270 million, with adjusted earnings per share of $0.34 to $0.38. Analysts, on average, were modeling significantly higher earnings of $0.90 per share on revenue closer to $332 million. 

That weak outlook and SMART's top-line shortfall last quarter obviously left investors wanting more today.

Steve Symington has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

SMART Global Holdings, Inc. Stock Quote
SMART Global Holdings, Inc.
SGH
$19.60 (-1.90%) $0.38

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
377%
 
S&P 500 Returns
123%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/07/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.