Why SMART Global Holdings Stock Plunged Today

What happened

Shares of SMART Global Holdings (NASDAQ: SGH) were down 20.8% as of 12:30 p.m. EDT Friday after the specialty memory and storage solutions company announced mixed fiscal second-quarter 2019 results and disappointing guidance.

SMART Global's quarterly revenue declined 3.2% year over year to $304.1 million, translating into adjusted (non-GAAP) net income of $18 million, or $0.77 per share, down from $1.64 per share in the year-ago period. Analysts, on average, were expecting slightly lower adjusted earnings of $0.75 per share, but on significantly higher revenue of $317.3 million.

So what

Still, SMART Global Chairman and CEO Ajay Shah stated the company "continues to execute well" despite a "challenging environment."

More specifically, SMART Global's top-line decline was driven entirely by its Brazil business, where net sales fell 29.5% year over year to $147.1 million -- roughly in line with management's expectations -- on a "worsening price environment" for commodity memory products in smartphones and PCs. Meanwhile, SMART Global's specialty memory segment saw sales increase 9.8% to $115.6 million, and specialty compute and storage solutions delivered sales of $41.3 million stemming from the company's acquisition of Penguin Computing last summer.

"We have made good progress toward realizing synergies from our acquisition of Penguin Computing and remain focused on disciplined execution to drive our financial performance," added Shah.

Now what

For the current third quarter of fiscal 2019, SMART Global expects net sales of $260 million to $270 million, with adjusted earnings per share of $0.34 to $0.38. Analysts, on average, were modeling significantly higher earnings of $0.90 per share on revenue closer to $332 million.

That weak outlook and SMART's top-line shortfall last quarter obviously left investors wanting more today.

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Steve Symington has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.