Astera Labs (ALAB -2.33%) stock is seeing a substantial valuation pullback in this week’s trading. The semiconductor company’s share price was down 15.4% from last week’s market close as of 10 a.m. ET, according to data from S&P Global Market Intelligence.
Astera Labs published its fourth-quarter results after the market closed on Monday and actually reported sales and earnings for the period that beat Wall Street’s expectations. But despite topping sales and earnings expectations, the stock sold off because some investors didn’t think the results were strong enough to justify the company’s valuation.
Astera Labs stock slumps on Q4 results
Astera Labs posted non-GAAP (adjusted) earnings per share of $0.37 on revenue of $141.1 million in the fourth quarter. For comparison, the average Wall Street estimate had called for the business to post adjusted earnings per share of $0.26 on revenue of $127.2 million.
Sales were up roughly 179% year over year in the period, and the company reported a gross margin of 74%. While the gross margin figure was down from the margin of 77.3% posted by the business in the prior-year quarter, it was still a strong performance. Some investors may have been concerned by the margin decline, but the overall performance picture for the quarter was impressive — and management also issued encouraging guidance for the current quarter.
What’s next for Astera Labs?
With this week’s pullback, Astera Labs is now valued at roughly $14 billion and trades at approximately 70 times this year’s expected earnings and 21 times expected sales. While the company has a heavily growth-dependent valuation, it’s been growing its sales and earnings at an explosive clip.
For the current quarter, Astera Labs is guiding for sales to be between $151 million and $155 million. If sales were to hit the midpoint of that target range, it would work out to year-over-year growth of roughly 134%. The company expects its GAAP and adjusted gross margins to come in at approximately 74%, and adjusted earnings per share for the period are projected to be between $0.28 and $0.29. With the company seeing strong sales and earnings at the moment and plenty of growth opportunities ahead, the stock could be a worthwhile buy on this week’s pullback.
Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
