After reading the call, I can tell you this will be $20+ very soon
It seems pretty clear from the call, the lower margin will be a 1 quarter problem and it will be moving higher from here on out. They switched to 12" wafers and had to buy all new equipment to do so. The sales guidance of $350 represents a 50% sequential increase! When these margins start moving hogher you end up with a $30 stock early next year.
"Williams Financial Group’s Cody Acree today is impressed by the prospect that OmniVision has bounced back from a prior defeat:
After having been excluded from supplying Apple its image sensor to the iPhone 4S (supplied by Sony), the company’s strong October forecast looks to be evidence that it has retaken the socket for the iPhone 5, a feat that not many suppliers are able to accomplish once being displaced.
The question, writes Acree, is whether OmniVision will be able to improve profit while supporting the huge startup cost of supplying Apple in volume:
With OVTI, one can definitely see the good and bad side of winning Apple’s business. To earn the socket, OVTI has pushed to advanced product developments, which now has to be produced in very heavy volumes. Often, leading edge products are not yet cost optimized and can be a drag on gross margins and this situation is only exaggerated when needing to guarantee the volume necessary to ensure Apple’s needs are fully met. Over the next few quarters, negotiations with suppliers, yield improvements, and design adjustments should drive down manufacturing costs and help gross margins.
Raymond James’s Hans Mosesmann reiterates an Outperform rating on the shares, while raising his price target to $21 from $18, writing that the forecast “all but confirms placement in upcoming Apple products.”
Mosesmann is sounds more confident than Acree that OmniVision’s opportunity with Apple is worth possible pressure on profits in the short term:
While the ramp is pressuring gross margins and muting any near- term EPS benefit, we’re clearly in the glass half full camp. This is especially true in a smartphone and tablet environment with only a few key leaders and a plethora of fallen stars. Ultimately, OmniVision has secured its growth profile and will work with suppliers to improve costs/margins over the next few quarters"