Why Silicon Motion Technology Got Crushed

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Silicon Motion Technology (NAS: SIMO) have gotten crushed today, down by 19% at the low, after the company reported third-quarter earnings.

So what: Revenue in the third quarter added up to $77.1 million. Adjusted net income came out to $0.54 per share. Both of those figures topped consensus estimates, which were calling for $74.4 million up top and $0.46 per share down below. The third quarter was strong thanks to better-than-expected LTE transceiver orders from Samsung. The real kicker was the guidance.

Now what: The company said it was originally expecting these sales in the fourth quarter, but they've been shifted forward to the third quarter. As a result, fourth quarter revenue is expected to decline between 3% and 9% sequentially, with non-GAAP gross margin of 44% to 46%. It seems like the expected revenue drop is causing the sell-off, but if it were based solely on sales being shifted -- and not lost -- this would be a case of overreaction. Full-year revenue should grow between 25% and 27%.

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The article Why Silicon Motion Technology Got Crushed originally appeared on Fool.com.

Evan Niu, CFA, has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. 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.

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