What Happened:

Shares of chip designer Allegro MicroSystems (NASDAQ:ALGM) fell 18.4% in the morning session after the company reported first quarter results. Its revenue guidance for next quarter missed analysts' expectations and its operating margin shrunk. Gross margin also declined significantly, while inventory levels ticked up slightly. 

On the other hand, Allegro MicroSystems blew past analysts' EPS expectations this quarter. Its revenue outperformed Wall Street's estimates. Overall, the results could have been better.

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What is the market telling us:

Allegro MicroSystems's shares are quite volatile and over the last year have had 12 moves greater than 5%. But moves this big are very rare even for Allegro MicroSystems and that is indicating to us that this news had a significant impact on the market's perception of the business. 

The biggest move we wrote about over the last year was 3 months ago, when the stock gained 11.1% on the news that the company reported third-quarter results with EPS exceeding expectations. Its inventory levels shrunk, and free cash flow improved significantly. 

On the other hand, its revenue and EPS guidance for the next quarter missed analysts' expectations, and its gross margin shrunk. Its revenue also missed slightly, but its Automotive segment showed strength, driven by a 45% year-on-year increase in its e-Mobility applications. Overall, it was a mixed quarter for the company.

Allegro MicroSystems is down 7.7% since the beginning of the year, and at $27.19 per share it is trading 48.4% below its 52-week high of $52.72 from July 2023. Investors who bought $1,000 worth of Allegro MicroSystems's shares at the IPO in October 2020 would now be looking at an investment worth $1,538.

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