Why Photronics Stock Collapsed 37% This Week
Key Points
Photronics released earnings this week, posting a decline in revenue.
The company remains profitable but has failed to capitalize on the AI revolution.
Shares now trade at a cheap-looking P/E ratio.
Shares of Photronics (NASDAQ: PLAB) collapsed 37.5% this week, according to data from S&P Global Market Intelligence. The photomask maker for advanced chipmaking slipped after reporting disappointing second-quarter earnings.
At one point this year, Photronics' shares were up 50%. Now, the stock is close to flat year-to-date (YTD).
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Revenue contraction
Photomasks are used as an advanced "stencil" to help map semiconductors layouts for advanced printing, as well as for LED displays. With the growing demand for semiconductors driven by the artificial intelligence (AI) revolution, investors have bucketed Photronics as a potential massive winner in 2026.
That has not proven to be true so far. Last quarter, Photronics' revenue fell 6.7% sequentially and was down 0.5% year-over-year. Not necessarily a hypergrowth AI stock. It remains profitable, with net income of $31.4 million in the quarter compared to $200 million in revenue.
Image source: Getty Images.
Time to buy the dip?
After this drop, Photronics' stock now trades at a price-to-earnings ratio (P/E) of just 12. It is not the most dominant business in the world, with many competitors, including in-house photomask solutions from the largest manufacturers. Revenue growth has also been stagnate in the last few years.
However, Photronics' stock now trades at a cheap earnings ratio, and could deliver value for shareholders if you believe it will eventually be a beneficiary of the AI revolution.
Brett Schafer 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.