PDF Solutions (NASDAQ: PDFS) saw its stock price plummet 5.09% in Friday's pre-market trading session, despite reporting strong second-quarter results that met analyst expectations. The sharp decline comes as D.A. Davidson initiated coverage of the company with a neutral rating and a $24 price target.

The software and services provider for the semiconductor industry announced quarterly adjusted earnings of 19 cents per share for the quarter ended June 30, in line with the mean expectation of four analysts. Revenue rose 24.2% to $51.73 million from a year ago, slightly above the expected $51.58 million. The company's analytics segment, which now makes up 94.4% of total revenue, delivered an impressive 28% year-over-year growth.

Despite the strong performance, investors seem to be reacting to D.A. Davidson's cautious stance on the stock. The $24 price target suggests limited upside potential from the current trading levels, which may have triggered the sell-off. The market's response highlights the sensitivity of growth stocks to analyst ratings and the challenges faced by companies in the competitive semiconductor industry, even when meeting or exceeding financial expectations.