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Why Himax Technologies, Inc. Stock Gained 72.5% in 2017

Keith Noonan, The Motley Fool

What happened

Himax Technologies, Inc. (NASDAQ: HIMX) stock climbed 72.5% in 2017, according to data provided by S&P Global Market Intelligence. The semiconductor company's shares climbed on better-than-expected fiscal performance and signs of increasing demand for its imaging chips.

So what

Himax stock posted significant gains in 2017 following strong quarterly reports, In February, the company reported a 14% year-over-year sales increase for the fourth quarter of the 2016 fiscal year and issued promising guidance -- causing shares to jump 28% in the month. The stock enjoyed another big jump in August (climbing 19% in the month) following the announcement of a partnership with Qualcomm and indications that Himax's chips would be used in Apple's iPhone X devices.

The company's stock then gained roughly 35% in November following third-quarter results that topped the average analyst sales and earnings estimates. However, the stock's gains would have likely been even more impressive were it not for an unexpected controversy that arrived in early December.

A chip on a circuit board.

Image source: Getty Images.

Citron Research, an investing publication that specializes in short-selling, published a comment on Twitter on Dec. 6 stating that Himax management had a history of fraud and indicated that the stock's bull run could soon come to an end. That proved to be correct, at least in the short term, as Himax shares dropped precipitously -- they wound up shedding 24% of their value across December and have yet to rebound. 

Now what

Citron Research has made calls that were notably ahead of the curve, but its track record is also populated with some big misses. Thus far, there do not seem to be any indications that Himax management is engaged in fraudulent activity. Trading at roughly 36 times forward earnings estimates, the stock is far from a low-risk investment, but it's probably best not to put too much weight on Citron's allegations at this point.  

While Himax stock does trade at a lofty earnings multiple, the company's business looks to have some positive catalysts ahead. Most notably, its chips for 3D imaging and facial recognition technology have the potential to be significant growth drivers, and increasing market adoption for 4K televisions is also likely to create sales momentum. Investors should keep in mind that the company's long-term outlook in these emerging product categories is difficult to predict, but the stock has feasible avenues to continued market-beating performance in 2018.

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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Apple and Twitter. The Motley Fool owns shares of Qualcomm and has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.