Saturday, August 25, 2018

FormFactor Looking At Increasingly Challenging End Markets

Shares of FormFactor (FORM) have fallen about 6% since my last update, which I actually consider a pretty restrained response to what has been a stream of bad (or at least weak) news about the chip market, including weakening NAND prices, delays in architecture transitions, and what seems to be a general slowing trend across the sector. Investors even shrugged off a fairly weak guide from FormFactor with second quarter earnings that led to a greater than 10% drop in the average EPS estimate for 2018 and a roughly 10% drop for the 2019 estimate as well.

I like FormFactor as a business, and I like the company’s leverage to increasingly sophisticated chip architectures that make the company’s MEMS-based probe card technology even more compelling and competitive. I don’t like the idea of potentially reaching into to a woodchipper to grab a bargain, though, as there is probably still more downside risk in chip volume expectations than upside risk. For those not afraid of earning the nickname “Stumpy”, there appears to be value in FormFactor today and even I admit wondering whether expectations are low enough to buy in now.

Read more here:
FormFactor Looking At Increasingly Challenging End Markets

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