$CCMP Expect Further Weakness On Trend Line Breakdown

CCCMP broke the uptrend yesterday and the stock crashed hard. For those that want to buy the dip, we advise not to. We think further weakness is ahead after yesterday's technical damage. The earliest near-term support we see is around $125.

Besides the technicals, CCCMP issued soft guidance, so the fundamentals don't support a higher price as well. Here are the highlights:

Cabot Microelectronics (CCMP -14.5%) beat Wall Street's earnings target on in-line sales in its Q4, but guided below views for the current quarter.

During the quarter, the company decided to cease future investment in the wood treatment business and not construct a new production facility to replace operations in Matamoros, Mexico and Tuscaloosa, Alabama, and triggered a non-cash impairment charge of $67.4M negatively impacting Q4 and FY results.

On a year-over-year basis, Cabot earnings rose 13% while sales jumped 78%, as revenue got a boost from its acquisition of KMG Chemicals. Excluding that deal, sales were flat vs. a year earlier.

For Q1, the company guided revenue of ~$279M, +26% Y/Y but flat sequentially

Electronic Materials revenue is expected to be approximately flat sequentially and Performance Materials revenue is expected to be approximately flat to up low single digits sequentially.

Forecasts FY 2020 adjusted EBITDA to be between $350M - $380M.

As always, use protective stops and trade with caution.

Good luck to all!