Why Shares of Tower Semiconductor Slumped Today

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What happened

Shares of Tower Semiconductor (NASDAQ: TSEM), which operates under the brand name TowerJazz, tumbled on Thursday following the release of the company's second-quarter report. While earnings came in ahead of analyst expectations, weak guidance overshadowed the Q2 numbers. As of 1:55 p.m. EDT, the stock was down about 12%.

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So what

Tower reported second-quarter revenue of $335 million, down 2.9% year over year and in line with the average analyst estimate. Revenue was up about 7% from the first quarter.

Non-GAAP earnings per share came in at $0.42, down from $0.54 in the prior-year period but $0.02 better than analysts were expecting. GAAP gross margin was 23.4%, down from 26.4% in the prior-year period. Despite the lower revenue, operating expenses rose slightly compared to the second quarter of 2017.

Tower expects to produce third-quarter revenue of $335 million, well below the average analyst estimate of $361.9 million. Fourth-quarter revenue is expected between $360 million and $380 million, straddling the average analyst estimate of $377.9 million.

Now what

Tower expects a weak third quarter, driven by softness in the mobile sector, recent reductions in customer demand, and shipments of SiGe products being pushed back. The company expects to generate record revenue in the fourth quarter, with additional SiGe capacity coming on line in the first quarter of 2019.

While business is expected to pick up later in the year, investors focused on the weak third-quarter guidance and pushed the stock lower.

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