Please ensure Javascript is enabled for purposes of website accessibility

Why Amkor Technology Stock Crashed 15% After Earnings

By Rich Smith – Updated Oct 27, 2020 at 11:07AM

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

This is not how earnings beats are supposed to work.

What happened

Shares of semiconductor tester and packager Amkor Technology (AMKR -1.24%) collapsed after the company reported earnings last night. Amkor beat estimates, reporting $0.38 per-share profit on sales of $1.35 billion -- both numbers better than the $0.26 profit and $1.25 billion revenue that Wall Street analysts had forecast.  

Despite this, Amkor stock is down 14.7% as of 10:20 a.m. EDT today.

Glowing semiconductor chip

Amkor's business was red-hot last quarter -- but its stock is not. Image source: Getty Images.

So what

So what went wrong with Amkor's earnings? Why are investors selling off Amkor stock on an "earnings beat?" Honestly, I'm at a loss as to how to answer that.

Sales grew 25% year over year, an "all-time record quarterly revenue" for the company, management said in the earnings press release. It also noted that demand was "stronger than expected." Gross margins on those sales jumped 100 basis points to 17.8% and operating margins soared 210 basis points to 9.4%. On the bottom line, the company's $0.38 per-share earnings were real, net profits, not some "adjusted" other pro forma number. And on top of all that, Amkor has just initiated the payment of a dividend -- just $0.04 per share, per quarter for now -- but it's a start.  

All around, the quarter looked fabulous to me.

Now what

And things could get even better. In its new guidance for Q4, Amkor is projecting sales will run between $1.25 billion and $1.35 billion, with gross margins between 17% and 20% (so probably even better than in Q3). On the bottom line, Amkor projects net income to range from $0.28 per share to $0.47 per share.

That's a very wide range of potential results for Q4. Still, the entirety of the range lies above the $0.23 per share that Wall Street is predicting, promising yet another earnings beat for Amkor in Q4.

Rich Smith 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.

Premium Investing Services

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