What happened
Shares of Aehr Test Systems (AEHR -3.91%) plunged more than 21% at one point on Friday, before recovering somewhat to just a 17.6% loss as of 12:48 p.m. ET.
The semiconductor testing equipment manufacturer reported fiscal second-quarter earnings on Thursday night, which actually came in slightly ahead of expectations. However, given the company's massive run in 2021, investors were likely looking for an even bigger beat and guidance hike, which they didn't get. Up so much in 2021, it looks as though some are cashing in their profits to start the new year.
Image source: Getty Images.
So what
In the quarter, Aehr reported sales of $9.6 million, up a whopping 471% over the prior year, along with adjusted (non-GAAP) earnings per share of $0.05, beating expectations by $0.01.
Some may be wondering why the stock would plunge so much on the back of those solid results. To venture a guess, I think it's because of two reasons. One, Aehr was up a ridiculous 856% in 2021, so investors may have been looking for an excuse to cash in their gains.
That reason may have come with management's mere reiteration of its full-year guidance of at least $50 million in revenue. Management raised that guidance a whopping 80% to the $50 million figure on its first-quarter earnings release back in September, so investors may have been looking for yet another raise to Aehr's full-year outlook. Since that didn't happen, it looks like some may have cashed in their 2021 winnings. Prior to earnings, Aehr's stock had been trading at about 10 times that sales outlook, which is a tad high for a semiconductor equipment manufacturer.
Now what
The good news for Aehr shareholders is that there doesn't seem to be anything amiss with its business, just that expectations may have gotten a bit too high, too fast. In the press release, management reiterated strong demand for its systems, especially in the high-growth silicon carbide test and burn-in markets.
Aehr's equipment helps test a variety of semiconductors for soundness and the ability to handle high temperatures, which is crucial for the electric vehicle market. Semiconductor-heavy EVs will likely cause big growth in silicon carbide demand in the decade ahead, so a large market opportunity is still there for this small-cap stock.
After today's sell-off, investors may wish to begin researching this name, given its favorable growth prospects and newly discounted stock price.
