Shares of Aehr Test Systems (AEHR 1.50%) plunged 48.4% in October, according to data from S&P Global Market Intelligence.

Aehr had skyrocketed earlier in the year, nearly tripling at one point before an electric-vehicle sales slowdown and rising interest rates caused the stock to pull back.

October, however, was particularly bad. Aehr reported earnings early in the month, which left some investors wanting. That was followed by a sharp rise in interest rates in conjunction with other electric-vehicle stocks confirming the industrywide slowdown.

Aehr beat estimates but didn't raise guidance

At first, it might be confusing that Aehr's stock fell after it reported quarterly numbers on Oct. 5. After all, revenue jumped 93% in the quarter ending Aug. 31, while adjusted (non-GAAP) earnings per share rose a sizzling 260%.

Aehr has seen its results skyrocket on demand for its wafer-lever test and burn-in systems, which are especially needed for silicon carbide (SiC) chips that go into electric vehicles and other applications. SiC is an emerging material that is seeing strong growth because of its properties in electric conductivity amid high temperatures.

The problem was that investors may have been expecting Aehr to raise its full-year guidance for 50% revenue growth and 90% earnings growth on the release, which management didn't do, only maintaining it. And as good as those numbers are, they would mean a significant slowdown for Aehr's results over the next couple of quarters. In addition, management admitted on the conference call that Aehr generated 88% of its revenue from a single customer, raising concerns over customer concentration.

Given that Aehr came into the month trading at a nosebleed valuation close to 75 times earnings, there wasn't too much room for error.

Following earnings, Aehr endured more headwinds. Long-term interest rates continued to rise sharply, with the 10-year Treasury bond yield rising to near 5% by midmonth. Higher long-term rates are a double negative for high-growth stocks, as higher rates lower the present value of earnings far out in the future. Furthermore, they push up yields on loans for big-ticket items, such as cars. And given that electric vehicles generally have a higher sticker price than gas-powered cars, rising rates are likely to slow EV sales disproportionately.

This fear was further confirmed as other EV and SiC-related stocks reported earnings later in the month. On Oct. 30, On Semiconductor (ON 2.53%), which is Aehr's 88% customer, had its own earnings report, in which it too beat earnings but also gave softer-than-expected guidance. The disappointment in the forward outlook was enough to take Aehr's stock another leg down.

Aehr could be interesting down here

Aehr now trades at a more palatable 38 times earnings, and the stock is obviously more attractive here than it was when it traded at 100 times earnings earlier this year.

There are two sides to consider. First, will the EV market eventually recover? Most industry participants think so, attributing this slowdown to the rapid rise in interest rates. As inflation normalizes and if interest rates come down, that could change, and EVs could reaccelerate. If so, Aehr has a lot of growth opportunities, not only in SiC but also gallium nitride and silicon photonics.

However, there are also risks. Aehr is still a small company, and its still heavily depends on equipment sales to a small number of customers, with a relatively low amount of "recurring" services revenue. So it's at the whim of large customers, and its growth could be volatile. Given the uncertainty of its emerging end-markets, Aehr will likely continue to be a roller coaster for investors.