Why SkyWater Technology Stock Jumped 33.1% Today

What happened

Shares of semiconductor manufacturer SkyWater Technology (NASDAQ:SKYT) jumped as much as 33.1% in trading on Tuesday after the company reported fourth-quarter 2022 financial results. Shares have been gaining momentum all morning and hit their high at 12:10 p.m. ET today.

So what

Revenue was up 69% in the quarter to $65.1 million, and the net loss was $3 million, or $0.03 per share, much better than the $27 million loss a year ago. Analysts were expecting a loss of $0.11 per share, so results vastly exceeded expectations.

For 2023, analysts are still expecting a $0.34 loss per share, although those estimates haven't been updated since earnings came out. It's possible the company gets closer to profitability given the strong revenue growth.

Now what

Management said it thinks a long-term growth target of 25% is still attainable, and that would definitely result in rapidly improving fundamentals. Gross margin improved to 25.4% in the fourth quarter compared to negative 43.1% a year ago, which shows the high fixed costs associated with the semiconductor business.

The test for investors is that this is a very challenging industry, and SkyWater Technology still isn't profitable. Shares trade for more than 2 times revenue, and if management can execute on its growth plans, that could turn out to be cheap. But there's plenty of risk given the recent losses, and I would like to see shares pull back from today's pop before jumping in.

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Travis Hoium 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.