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Why Silicon Laboratories Stock Just Dropped 13%

By Rich Smith - Jan 29, 2020 at 12:51PM

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Shares short-circuit on an earnings miss, and a warning of a second.

What happened

Shares of semiconductor company Silicon Laboratories (SLAB -0.49%) fell 13.3% through noon EST on Wednesday after the company reported fiscal Q4 and full-year earnings that fell short of analyst expectations.  

Adjusted quarterly EPS of $0.84 on sales of $219.4 million missed Wall Street's projections for an $0.89 profit on sales of $222.1 million.  

Short circuit on a semiconductor chip

Image source: Getty Images.

So what

The results were mixed. On the one hand, while quarterly sales missed expectations, they were within the guidance range, management said, and up about 2% year over year. Profits, on the other hand, declined sharply from last year. When calculated according to generally accepted accounting principles (GAAP), Silicon Labs earned $0.22 per share in the final quarter of the year, down 37% from Q4 2018.

Discussing the results, management described the macroenvironment for semiconductors as challenging. Nevertheless, the company noted that infrastructure sales climbed 5% year over year in Q4, and sales attributed to the Internet of Things rose 7%, which doesn't sound so awful.

Now what

Looking ahead, however, management did itself no favors. New guidance for Q1 2020 sales calls for revenue to fall somewhere between $209 million and $219 million. At the midpoint, that's hardly better than the $213.6 million in sales that Wall Street was already forecasting. Worse, management says its GAAP results could show a loss (with GAAP earnings to range from a loss of $0.03 per share to a gain of $0.07), while non-GAAP (adjusted) profits for the quarter will range from only $0.57 to perhaps $0.67.  

At the midpoint, that's $0.62 per share -- but Wall Street wants to see $0.65 per share.

In other words, after reporting one earnings miss in Q4, Silicon Labs looks set to report another in Q1.

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