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Why Shares of SkyWater Technology Are Plummeting Today

By Scott Levine – Nov 3, 2021 at 3:41PM

Key Points

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The company widely missed estimates, but management is confident in the future.

What happened

Coming up short of analysts' expectations that SkyWater Technology (SKYT 4.76%) would report revenue of $43.2 million and a loss per share of $0.14, the semiconductor manufacturer reported sales of $35 million and a loss per share of $0.29 after the market closed yesterday. Investors today are expressing their disapproval -- not only of the headline figures but of earnings and cash flow issues.

As of 2:15 p.m. EDT, SkyWater's stock is down 35%.

A technician assembles a circuit board.

Image source: Getty Images.

So what

Aside from the top and bottom of the income statement, it was what was in the middle that's also causing investors consternation today. For starters, SkyWater Technology reported a third-quarter 2021 gross loss of $1.8 million, a notable decrease from the $7.3 million gross profit that the company reported during the same period last year. The company's earnings before interest, taxes, depreciation, and amortization (EBITDA) provided an additional cause for concern. Unlike the positive EBITDA of $4.4 billion that the company reported in Q3 2020, SkyWater Technology reported EBITDA of negative $6 million for the recently completed quarter.

Turning from the income statement to the cash flow statement, investors found little relief. Most notably, SkyWater reported negative cash from operations of $6.4 million in Q3 2021, representing yet another quarter of operating cash outflow. Consequently, SkyWater Technology has generated negative cash from operations of $37.2 million through the first nine months of 2021, representing a far cry from the positive $91.7 million that it reported through the same period in 2020.

Now what

Speaking to the company's disappointing Q3, Thomas Sonderman, SkyWater's CEO, said that "Supply chain challenges and hiring constraints plus continued delays in the funding of existing United States Government programs had a magnified near-term effect on the company." Despite the headwinds, Sonderman remains committed to the company's vision of "25% annual top line growth," though he doesn't clarify the exact time period which he is referencing. While management's conviction is worth noting, investors may want to wait until the company's financials improve before picking up shares.

Scott Levine 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.

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