Chardan Capital Markets downgraded display manufacturer Himax Technologies (HIMX) to Sell, with a new $6 price target.
Himax said its second-quarter revenue would be flat, because of Samsung Electronics (SSNLF), one of its largest customers. Here is analyst Jay Srivatsa:
Inventory buildup at Samsung puts Q2:14 revenue guidance well below consensus.
The company guided for revenues to be flat from $195 million in Q1:14 and expects gross margins to be flat to down sequentially. Non-GAAP EPS is expected to be $0.13 to $0.15 in Q2:14 but earnings partially reflect gain of $12.24 million from the sale of its investment in a US display company. Street consensus was revenues of $223 million and non-GAAP EPS of $0.13.
Main reason for the weak guidance was the decline in orders from Samsung, which appears to be struggling to compete with the white box handset manufacturers in China.
Chardan does not expect Google (GOOG) Glass to give Himax a sales boost this year either, as Himax is not building up its LCoS panel capacity:
Glass launch could be a 2015 event. Over the past quarter, HIMX has not extended its LCoS panel capacity beyond 300K per month and also revealed that they do not plan to ramp up capacity in 2014 leading the company to state that LCoS revenues in 2014 is unlikely to be significant. This suggests to us that despite the modest proliferation of Google Glass, HIMX may not get the “go ahead” from Google to drive LCoS panel capacity to higher levels of production in anticipation of a formal launch in 2014.
Furthermore, the other LCoS customers that HIMX has garnered appear to be early stages of design and launch and are unlikely to contribute meaningfully this year. We had slashed our 2014 estimate for LCoS shipments from original estimate of 15 million units to 8 million and more recently down to 5 million units. It appears that even 5 million could be aggressive for this year.
This Chardan analysis highlights problems, but ignores the positive news. What about the growth ares like 4K panel drivers, automotive cameras, China white-box customers (are these the same ones giving Samsung competition? If so, that is neutral news)
Beware of "reverse tips" (as Jesse Livermore described in his book). Analyst opinions are nice, but one has to do DD for themselves to find all the conveniently missing info. I think HIMX filings and footnotes are easy to understand, unlike some other publicly traded securities. It is another reason i am long HIMX
By focusing on the negatives, combined with a market correction in play, they can assure gains on the short side. Easier than going long. For now. Dangerous, considering any good news from Google or others could knock this right back above $10. I'm staying long.