Why Cray Shares Collapsed
May 1st 2013 1:06PM
Updated May 1st 2013 2:00PM
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Cray have fallen by over 13% today after the company reported earnings that, in spite of narrowly beating analyst expectations, still showed a tremendous decline that may well have spooked some short-term investors.
So what: Cray operates in a highly chunky environment, where it may notch a huge sale one quarter and pull in next to nothing in the following quarter. There's only so much demand for supercomputers -- and there wasn't much demand this quarter, as Cray reported $79.5 million in revenue and a loss of $0.23 per share, both significant declines from the year-ago period, and more notably the prior quarter, which saw revenue of $188.8 million and $0.41 in EPS. However, analysts were looking for only $70.3 million on the top line and a slightly steeper loss of $0.24 per share, so Cray put together a double beat.
Now what: Cray's margins were weaker than expected, which could also explain the drop, as could a number of warnings on the well-known uncertainty, which wasn't enough to push Cray executives to shift from their $500 million annual revenue target (with 45% expected to come during the fourth quarter). That's about 20% higher than trailing-12-month revenue (not including this quarter), but after a share-price double over the past year, Cray shareholders might not think there's enough upside left to stick around.
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The article Why Cray Shares Collapsed originally appeared on Fool.com.Fool contributor Alex Planes holds no financial position in any company mentioned here. Add him on Google+ or follow him on Twitter @TMFBiggles for more insight into markets, history, and technology. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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