Home Stocks InvenSense Inc Sinks on Earnings Miss, Stock Rating Downgrade

InvenSense Inc Sinks on Earnings Miss, Stock Rating Downgrade

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InvenSense Inc (NYSE:INVN) plummeted after reporting earnings below the consensus estimates of Wall Street analysts. The stock of the company was trading $16.42 per share, down by more than 23% to $16.41 per share at the time of this writing around 1:00 P.M. in New York.

Financial results

For its second quarter fiscal 2015, InvenSense Inc (NYSE:INVN) reported non-GAAP earnings of $0.05 per share and $90.2 million in revenue.  The company’s earnings were lower compared with $0.08 per share while its revenue was higher than its $66.7 million in the year ago quarter.

“Q2 was a record revenue quarter, with the North America region leading our growth… With strong market share gain in mobile, our team has executed on the first step in our growth strategy, while our investment in content increase has delivered a full portfolio of differentiated products that we believe will provide meaningful growth opportunity for years to come,” said InvenSense CEO Behrooz Abdi

Wall Street analysts expected invenSense Inc (NYSE:INVN) to deliver $0.16 in earnings per share and $90.48 million in revenue.

During the quarter, the company suffered an unexpected huge decline in gross margin, which negatively impacted its earnings. Its gross margin declined from 47% to 35%.

InvenSense Inc (NYSE:INVN) explained that its gross margin dropped because of stronger-than-expected sales to customers with lower gross margins and the significant write-down of older generation inventory.

InvenSense issued lower than expected guidance

InvenSense Inc (NYSE:INVN) issued lower than expected earnings and revenue guidance for the current quarter. The company estimated that it would be able to achieve earnings in the range of $0.17 to $0.21 per share and revenue of around $108 million to $115 million.

Wall Street analysts have a consensus estimate of $0.30 in earnings per share and $116.32 million in revenue for the current quarter.

For its full fiscal year, InvenSense Inc (NYSE:INVN) maintained its revenue growth guidance of 25% to 35%.  Analysts expected the company to achieve a revenue growth of 48.5%.

InvenSense stock rating downgraded

Analysts at Pacific Crest downgraded their rating for the shares of InvenSense Inc (NYSE:INVN) to Sector Perform. The research firm also removed its $28 price target for the stock.

Pacific Crest analyst John Vinh explained that the downgrade was due to the weak performance of the company. According to him, “InvenSense executed poorly in what was anticipated to be one of the strongest quarters in the company’s history.

“Price pressures from Apple and Samsung and the acknowledgment of potential second-sourcing significantly reduce our confidence that InvenSense will be able to sustain growth and avoid multiple compression,” added Vinh.

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