Why Spreadtrum Shares Sank


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 electronics chip maker Spreadtrum Communications (NAS: SPRD) plunged 12% today after its quarterly results and guidance missed Wall Street expectations.

So what: Spreadtrum shares have surged over past several months on strong smartphone shipments, but today's third-quarter profit miss -- EPS of $0.44 versus the consensus of $0.46 -- coupled with light fourth-quarter revenue guidance is triggering concerns over peaking demand. The company's operating margins even fell to 13.4% from 21.4% in the year-ago period, suggesting that competition in the space is also heating up.

Now what: Management now sees fourth-quarter revenue of $189 million to $196 million, versus Wall Street's view of $194.7 million. "In Q4, we anticipate continuing increases in R&D spendings as we bring new products to market and expand our portfolio to new technologies," CFO Shannon Gao said in a statement. "In the short term, we expect that our operating margin will remain stable." Of course, with the stock still up about 50% from its 52-week lows, I'd wait for even more of a pullback before buying into that bullishness.

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The article Why Spreadtrum Shares Sank originally appeared on Fool.com.

Fool contributor Brian Pacampara 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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