Why Shares of AXT Inc. Dropped Today

What happened

Shares of semiconductor substrate manufacturer AXT Inc. (NASDAQ: AXTI  ) slumped on Thursday after the company disclosed that a fire at one of its facilities halted all wafer substrate production. Guidance was lowered as a result, sending the stock down 16% by 11:15 a.m. EDT.

So what

A fire at AXT's Beijing manufacturing facility occurred on the evening of March 15, located in the gallium arsenide and germanium crystal growth production area. All production in that area has been stopped. The fire caused no injuries or structural damage, but the processing of all wafer substrates has been halted, even in unaffected areas.

The AXT logo.

Image source: AXT Inc.

AXT is working with the fire department and other regulatory agencies in an effort to find the source of the fire. The company provided no estimate for when production would resume. First-quarter revenue guidance was lowered as a result of the shutdown, with the company now expecting revenue between $18.0 million and $18.5 million. The previous guidance range was $19.5 million to $20.5 million.

Now what

The market reacted harshly to what appears to be a temporary situation. AXT stock nearly tripled from the beginning of 2016 to market close on Wednesday, so volatility isn't surprising, especially given that the stock traded for 35 times forward earnings prior to Thursday's drop. But the loss of a few million dollars of revenue due to a one-time incident doesn't seem very meaningful in the long run.

10 stocks we like better than AXT
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now...and AXT wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of February 6, 2017.

Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 4008442, ~/Articles/ArticleHandler.aspx, 3/25/2017 1:49:08 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 4 hours ago Sponsored by:
Change down DOW 20596.7 -59.9 -0.3%
Change down S&P 500 2344.0 -2.0 -0.1%
Change up NASD 5828.7 11.0 0.2%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

3/24/2017 4:00 PM
AXTI $5.65 Down -0.05 -0.88%
AXT CAPS Rating: **