Please ensure Javascript is enabled for purposes of website accessibility

Why Shares of MACOM Technology Jumped Today

By Timothy Green – May 8, 2019 at 12:06PM

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

Revenue declined a bit less than expected, and the company sees recovery ahead in the second half.

What happened

Shares of MACOM Technology Solutions Holdings (MTSI -1.59%) soared on Wednesday following a mixed fiscal second-quarter report. Revenue came in ahead of expectations, enough to overshadow an earnings miss. An analyst upgrade added fuel to the fire, propelling the stock up 30.6% by 11:50 a.m. EDT.

So what

MACOM reported second-quarter adjusted revenue of $121.5 million, down 19.2% year over year but about $0.4 million above the average analyst estimate. The top line was hit hard by an inventory correction in the data center market, which was more disruptive than MACOM had initially expected.

A rising stock chart.

Image source: Getty Images.

Non-GAAP (generally accepted accounting principles) earnings per share came in at a loss of $0.18, down from a profit of $0.13 in the prior-year period and $0.01 below analyst expectations. Adjusted earnings before interest, taxes, depreciation, and amortization was $3.4 million, down from $23.4 million one year ago.

For the third quarter, MACOM expects to produce revenue between $120 million and $124 million, along with a non-GAAP net loss per share between $0.04 and $0.08.

Now what

While the data center inventory correction is causing problems for MACOM, the company sees better days ahead. "Some customers are indicating they will be exiting the quarter at more normalized inventory levels, which is a leading indicator of a recovery in the second half of the year," said MACOM president and CEO John Croteau.

Analysts from Craig-Hallum are on board with that story, upgrading the stock to "buy" on Wednesday and raising the price target from $17 to $25. Even after the post-earnings surge, shares of MACOM trade a bit below $17 per share.

While MACOM's results were far from impressive, the promise of a second-half recovery and slightly higher-than-expected revenue was enough to push up the stock.

Timothy Green 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

MACOM Technology Solutions Holdings, Inc. Stock Quote
MACOM Technology Solutions Holdings, Inc.
MTSI
$52.53 (-1.59%) $0.85

*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
329%
 
S&P 500 Returns
106%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/24/2022.

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.