FormFactor Dips 26% in 6 Months: Buy, Sell or Hold the Stock?

FormFactor’s (FORM Quick QuoteFORM – Free Report) shares have lost 26.1% in the trailing six months, underperforming the broader Zacks Computer and Technology sector’s return of 3.7% and the Zacks Electronics- Semiconductors industry’s appreciation of 15.7%.

FORM shares have lagged industry peers like Marvell Technology (MRVL Quick QuoteMRVL – Free Report) , which have surged 63.8% over the same time frame.

FormFactor’s share price decline can be attributed to expected declines in demand for foundry and logic probe cards, which contributed to a sequential revenue decline of $190 million in the fourth quarter of 2024.
Lower sales in Europe and Malaysia have exacerbated challenges, underscoring regional demand softness.

However, FormFactor expects record demand for DRAM probe cards in the fourth quarter, driven by strong DDR5 and High Bandwidth Memory contributions. This strong performance and moderate growth in the system segment are expected to help mitigate the projected decline in demand for Foundry and Logic probe cards.

FORM Leads With Innovation in Probe Card Industry

FormFactor’s unique capabilities position it for accelerated growth in the advanced probe card market. The company offers a diverse range of probe cards for various applications, including RF, MMW and radar, essential for high-performance wafer testing.

FORM’s Apollo vertical probe cards excel in flip chip and pre-bump applications, ideal for area-array and perimeter-layout probing. They are the top choices for testing graphics processors, game console microprocessors and automotive microcontrollers, showcasing versatility and reliability.

FormFactor’s diversification strategy features a broad lab-to-fab product portfolio across foundry and logic, DRAM, flash probe card and systems segment products. It helps the company stand out from competitors and secure business with key customers.

FORM expects the Advanced Probe Card market to grow to $2.7 billion by 2028, driven by innovation in products like SmartMatrix, Kepler and Pyramid RF probe cards, which meet the increasing demands of advanced technologies like 5G. Additionally, the company’s broad product portfolio and diverse customer base contribute to this growth projection.

The company’s significant customer base, including Intel, Samsung, Micron Technology (MU Quick QuoteMU – Free Report) , SK Hynix and Taiwan Semiconductor (TSM Quick QuoteTSM – Free Report) , has played a key role in its financial success, consistently contributing more than 10% to revenues over the years.

Challenging Macroeconomic Condition Hurts FormFactor

FORM is navigating challenging macroeconomic conditions and weakened semiconductor demand. Declining revenues in Foundry and Logic, coupled with the sale of its higher-margin FRT business within the Systems segment, are expected to impact its performance.

FormFactor is facing rising operating expenses, which are affecting profitability amid challenging market conditions. In third-quarter fiscal 2024, total operating expenses were $66.9 million, a slight decrease from $69.4 million in the previous quarter, highlighting potential concerns about the company’s financial health and performance.

FORM’s Sales & Earnings Estimates Trend Upward

For the first quarter of fiscal 2025, the Zacks Consensus Estimate for earnings is pegged at 33 cents per share, unchanged over the past 30 days. This indicates a year-over-year surge of 88.33%.

The Zacks Consensus Estimate for first-quarter fiscal 2025 revenues is pegged at $192.72 billion, suggesting a 14.22% increase from the prior-year quarter.

FormFactor has shown a mixed earnings surprise record, missing the Zacks Consensus Estimate in one of the trailing four quarters while exceeding it in the other three, with an average surprise of 5.14%.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

FormFactor’s Zacks Rank

FormFactor currently carries Zacks Rank #3 (Hold), suggesting that it may be wise to wait for a more favorable entry point in the stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.