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Shares of InvenSense (NYSE:INVN) are down nearly 24% today following the company's earnings release. Earnings for the most recent quarter, as well as the guidance for the current quarter, were both meaningfully below expectations.
Why it's happening
InvenSense reported revenue of $90.2 million for its fiscal second quarter, missing consensus of $90.48 million. The company also reported earnings per share of just $0.05, coming in well-below consensus of $0.16 and missing its guidance range of between $0.15 and $0.16 substantially.
The earnings per share miss was driven primarily by an unexpectedly large decline in gross margin. Management reported that the gross margin miss was caused by both stronger-than-expected sales to customers that yield lower gross margins (likely Apple and Samsung), as well as a significant writedown of older-generation inventory.
Further, InvenSense issued revenue guidance for the current quarter of between $108 million and $115 million, as well as earnings guidance of between $0.17 and $0.21 for the same period. These were both below analyst estimates of $116.32 million and $0.30, respectively.
The gross margin decline due to the high proportion of sales to Samsung and Apple is expected to persist for the remainder of the fiscal year, although management stated that the inventory writedown is not expected to repeat in future quarters.
InvenSense maintained its revenue growth guidance for the current fiscal year of 25-35%. In fact, CFO Mark Dentinger stated that if he were forced to "make a call right now," he'd state that InvenSense is "headed [to] over 35% year-on-year [growth]." Analyst consensus for InvenSense's full-year revenue growth is 48.50%.
Ashraf Eassa is short $18 puts on InvenSense expiring on Oct. 31. The Motley Fool recommends Apple and InvenSense. The Motley Fool owns shares of Apple and InvenSense. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.