Himax Is Undoubtedly Overvalued, but Is It a Buy?HIMX) has always been a volatile, range-bound stock, but it seems like the market has started to realize the company’s true potential now. Heading into the earnings season, Himax Technologies sees Q1FY15 earnings per share of $0.07-$0.09, as opposed to the consensus of $0.09. The company’s revenue guidance for Q1 was also strong and I expect it to beat the estimates once again.
Himax Technologies has acquired a robust position in the market mainly due to the continuously rising need for smartphones and the increasing trend to purchase smart televisions that has aided the company in building an exciting top-line stream.
Himax Technologies’ stock price saw sudden jump just after the announcement that they will become the dealer for the microdisplay used in Google Glasses.
However, the company’s long-term prospects still look bright as the company is taking advantage of the astonishing sales growth of smartphones in China. Throughout 2013, the total number of active smartphones in China exceeded 0.7 billion. Moreover, mobile phone costs are falling sharply due to intensifying competition in the smartphone market. As an outcome, first-time smartphone buyers have purchased 41 percent of the entire number of devices sold in China.
According to a report from Business Insider, last year, approximately 70 percent of an overall 1.3 billion people in China used smart devices. It is forecasted that by the end of 2018, a total of 704.1 million smart devices, comprising of phones and tablets, will be used in China. This clearly indicates that Himax is headed in the correct direction to harness all the potential growth.
Apart from this, Himax Technologies is making efforts to maintain its leading position in the market, by publicizing designs for its single-chip touch technology and display driver integration solution for original equipment makers and key panel manufacturers. This technology, known as HiSTT, will certify that Himax is able to take complete benefit of this developing market.
Himax Technologies’ core business should gain strength in the near future. As for the longer-term, I think Himax’s outlook should be bright as it enters the Virtual Reality and Augmented Reality markets that are currently in the nascent stages of their development. Shares of Himax have risen very fast and although the stock is currently overvalued, I think it deserves the massive premium.
Published on Apr 28, 2016By Akshansh Gandhi