What Happened?
Shares of semiconductor testing company FormFactor (NASDAQ: FORM) fell 3.6% in the afternoon session after Wells Fargo reiterated its 'Hold' rating on the stock, citing concerns over the company's ability to improve its profit margins.
The bank's note followed FormFactor's mixed second-quarter results, where revenue of $195.8 million beat estimates but was down 0.8% from the prior year. Wells Fargo highlighted ongoing challenges in improving margins, which are being impacted by tariffs and rising operational costs. FormFactor's CEO, Mike Slessor, had previously acknowledged that recent financial results, particularly gross margins, have not reflected the company's market leadership position. Adding to industry-wide headwinds, the U.S. government has tightened rules on chip production equipment being imported into China, impacting major semiconductor companies and creating broader uncertainty in the sector.
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What Is The Market Telling Us
FormFactor’s shares are very volatile and have had 26 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 11 days ago when the stock gained 5.3% on the news that the stock rallied along with the broader semiconductor sector following comments from Federal Reserve Chair Jerome Powell that sparked a market-wide rally, overshadowing an analyst downgrade. The broader market surge came after Federal Reserve Chair Jerome Powell's speech at the Jackson Hole Economic Symposium increased investor confidence that the Fed may lower interest rates next month. The positive sentiment sparked a significant rally across Wall Street, with the technology and semiconductor sectors showing notable strength.
FormFactor is down 36.5% since the beginning of the year, and at $28.09 per share, it is trading 42.3% below its 52-week high of $48.72 from October 2024. Investors who bought $1,000 worth of FormFactor’s shares 5 years ago would now be looking at an investment worth $1,028.
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