FormFactor Shares Hit 52-Week High On Solid 2Q Earnings

Shares of technology company, FormFactor Inc. (NASDAQ:FORM) , hit a new 52-week high of $11.19 on Aug 22, eventually closing at $10.86. The company returned a massive 83.1% in a year and has added 20.7% year to date. Average volume of shares traded over the last three months was roughly 474K.

What's Driving FormFactor?

FormFactor is one of the world's foremost providers of vital wafer test technologies and proficiency, with a broad portfolio of high-performance probe cards for DRAM, Flash and SoC devices. With the NAND Flash market expanding at a rapid pace, the demand for probe card is also growing, which will continue to benefit FormFactor.

The company’s strong momentum for growth in the SoC business with escalating customer attention toward its product solutions, mainly driven by mobile, industrial and automotive applications should remain the solid growth catalysts, going forward.

The price appreciation can be attributed to FormFactor’s strong fundamentals and better-than-expected second-quarter 2016 results reported on Aug 2. In response to strong earnings, the stock has gained 10.4%.

In the second quarter, FormFactor reported earnings of 10 cents, which beat the Zacks Consensus Estimate by 3 cents. Also, revenues of $83.1 million were above the Zacks Consensus Estimate and the company’s guided range. The improvement was driven by an increase in both foundry and logic shipments for a key customer and stepped-up DRAM business.

Moreover, management provided an encouraging guidance for the third quarter. It expects revenues in the range of $118–$126 million and earnings per share in the range of 17–23cents. Cash flow is expected to be a positive amount between $10 million to $12 million, excluding acquisition-related payments.

FormFactor has a diversified business, both in terms of products offered and geographical presence. It has a leading position in the semiconductor testing market. During the quarter, the company completed the acquisition of Oregon-based Cascade Microtech to expand further into the semiconductor testing space by leveraging the acquired company’s resources to expand into untapped markets.

The combined entity is likely to achieve significant cost and revenue synergies supported by the expanded product portfolio, a bigger customer base and better infrastructure. In fact, the merger is expected to be immediately accretive to gross margins, profits and earnings per share. Management expects its addressable market opportunity would expand 40% to $1.4 billion from $1 billion by opening new engineering systems, thereby expanding the test and measurement businesses.

FormFactor’s strong revenue growth, favorable financial conditions, increasing market share due to solid execution and strong long-term growth potential position it favorably.

Moreover, the stock has also delivered an average earnings surprise of nearly 52.80% over the trailing four quarters. This Zacks Rank #1 (Strong Buy) stock has a long-term expected earnings growth rate of 12%.

Other Stocks to Consider

Some other well-placed stocks in the technology space are Cirrus Logic Inc. (NASDAQ:CRUS) , AXT Inc. (NASDAQ:AXTI) and Amkor Technology, Inc. (NASDAQ:AMKR) , each carrying a Zacks Rank #1 (Strong Buy).