Here in the middle of the artificial intelligence (AI) revolution, semiconductor stocks are red-hot -- and of the reddest, hottest semiconductor stocks on the market today is FormFactor (FORM +1.17%), a maker of probe cards and other equipment for testing the quality of manufactured chips.
FormFactor stock is flying today -- up 23.6% through 1:15 p.m. ET -- after the company beat on earnings last night. Analysts forecast FormFactor to earn just $0.25 per share on $200 million in third-quarter revenue, but FormFactor actually earned $0.33 per share on sales of $202.7 million.
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FormFactor Q3 earnings
That's still a pretty small revenue number for such a big earnings surprise -- and what's perhaps most surprising is that FormFactor's revenue actually declined 2.5% year over year (although it was up sequentially). Still, as CEO Mike Slessor pointed out, FormFactor is really "focused on, and committed to, improving our profitability."
And FormFactor's making some progress there.
True, the company's $0.33 profit was only a non-GAAP (adjusted) number. But actual earnings as calculated according to generally accepted accounting principles (GAAP) also improved markedly, nearly doubling sequentially to $0.20 per share. Still, as with revenue, GAAP earnings were down year over year, falling about 17%.
NASDAQ: FORM
Key Data Points
Is FormFactor stock a buy?
Worst of all, FormFactor's forecast for Q4 is an anemic $0.19 per share in GAAP net income, despite sales growing to $210 million, plus or minus.
These numbers appear to be better than what Wall Street is looking for. Still, with the stock valued at $4.5 billion, trailing net income less than $44 million, and a price-to-earnings ratio consequently hanging at a very high ratio of 102, I find it hard to get excited about the stock -- earnings beat notwithstanding.
For me, I'm afraid FormFactor stock remains a sell.
