Shares of Photronics (PLAB 1.87%) took a steep dive on Wednesday morning after a mildly disappointing earnings report. The stock fell as much as 18.9% in the morning session, recovering to a still-painful 15% price drop by noon ET.
Photronics' first-quarter financials
The maker of ultra-precise photo masks used in the manufacturing of semiconductor chips and digital display panels reported adjusted first-quarter earnings of $0.48 per share on sales of $216 million. The bottom-line result was in line with management's guidance and a rounding error away from meeting the Street's consensus target at $0.49 per share. But revenue fell below the bottom end of the official guidance range and $4 million short of the average analyst projection.
Looking ahead to the second quarter of fiscal 2024, Photronics set the midpoint of its earnings target just below the current analyst view with a revenue projection $1 million ahead of Wall Street's expectations.
Investors brushed off the positive surprises to focus on the downsides and rather conservative market analysis in management's comments.
Beyond the gloom: Photronics sees a brighter near-term future
"Demand was weaker and sales were softer than we expected during the first month of the quarter for both [integrated circuits] and [flat-panel displays]," CEO KangJyh Lee said in the earnings call. But it wasn't all doom and gloom. Lee added, "Demand improved during the quarter, increasing our revenue run rate and giving us confidence that revenue will improve in the second quarter."
All things considered, Lee expects customers to continue the current trend of adopting more-advanced and profitable technology generations this year, driven by higher demand for smartphones and high-end TV screens. Hence, order volumes should climb in the second and third quarters, setting Photronics up for robust results in the just-started fiscal year.
Photronics approached this report with high expectations, since the stock had gained 73% in the 52 weeks before today's price drop. But this is no high-flying market darling; it trades at the modest valuation of 13 times earnings and 10 times free cash flows right now. In other words, this looks like a tempting opportunity to invest in this direct play on the semiconductor and flat-panel display markets.
