Why Power-One's Shares Dropped

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 inverter maker Power-One fell 10% today, after the company gave disappointing outlook for the fourth quarter.

So what: Management updated fourth quarter 2012 guidance today, and said it expected revenues to be between $190 million and $195 million, and net loss would be $12 million to $15 million. The disappointment stems from analysts' estimates of $221 million in revenue, and positive earnings per share of $0.07.

Now what: Management blamed soft market conditions in renewable energy as the culprit, and said that Italy and Germany were much worse than expected. The company is still committed to solar in Europe long-term, but there can be a lot of ups and downs as the market matures and sheds heavy subsidies. Power-One looks like a value on the surface; but with competition heading up in the inverter market, and growth questionable, I would be cautious with this stock. It looks a lot like a value trap right now.

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The article Why Power-One's Shares Dropped originally appeared on Fool.com.

Fool contributor Travis Hoium has no position in any stocks mentioned. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw. The Motley Fool owns shares of Power-One. 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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