InvenSense (INVN, Financial), a leading provider of Motion Tracking sensor system on chips (SoC) and sound solutions for consumer electronic devices, reported significant growth of 19.32% in its revenue. The performance was led by a robust performance in both its 6-axis Motion Tracking solutions and its 2-asix optical image stabilization products in the first quarter that ended recently.
The company reported net revenue of $66.7 million. However, the company posted a net loss of $4.8 million, or earnings of $(0.05) per share, as against net income of $10.3 million, or earnings of $0.12 per share, in the same period last year.
Can InvenSense bounce back?
InvenSense looks pretty solid this calendar year as it ramps up the production with accelerated volume shipments in various flagship customer products such as Samsung’s (SSNLF, Financial) Galaxy S5 and LG’s G3. The company expects its 6-axis products family along with second generation Six-Axis MotionTracking SoCs, solutions such as the MPU-6500 and 6515 Android-compatible products that now comprises approximately 70% of its total shipment to boost its revenue in the upcoming quarters as the company is increasing the shipment for these products this quarter.
Moreover, the company expects tremendous growth for its third-generation Six-Axis SoC solutions this quarter as these solutions are rapidly penetrating in the market with industry top-tier customers and being embraced by various mobile customers in the market. This third-generation ultra-low power MotionTracking solution empowers the MotionTracking features with self-regulation and cohesive SensorFusion. Besides, its inventory remains relatively strong in expectation of the demand for its six-Axis products for second generation that will assist the company to concentrate more on the third generation six-Axis products with accelerated production and enhanced manufacturing capacity.
However, the company expects its gross margins to get pressurized due to the high volume pricing and lower initial manufacturing return at its top tier clients while increasing the production for the new products. But the company remains strong on its high volume system solutions coupled with aggressive manufacturing cost reductions to drive consistency in its gross margin.
Impressive moves
In addition, InvenSense has stretched its lead in the burgeoning and fast-growing markets of optical image stabilization (OIS), and has broadened its product profile in the low power precision Motion Tracking with the inclusion of various products that are gaining significant traction in the market should drive growth for the company in the category going forward.
InvenSense has also seen positive market traction with respect to its automatic activity recognition software suite at diverse set of consumer mobile fitness friends and big data companies. Besides, the company is aggressively working to bring new generation of wearable products and related service in the market with concrete marketing strategies that will monetize and turn out to be long term growth solutions for the company in the coming years.
Meanwhile, the company is seeing strong growth in North America from its existing as well as new clients from its complete product portfolio especially from the smartphone category. Also the company is planning to increase its volume in the region with added OEMs wearable device that will also help the company tremendously as the attach rates of gyro are continuously increasing due to an increasing demand for activity tracking and advanced algorithms in the region.
InvenSense is also expecting its Korean market to remain strong in the upcoming quarters due to the strong gain in its share and content including OIS that should better compensate the difficulties for OEM's customers in the end market. But the company continues to experience high demand for its Six-Axis MotionTracking solutions as well as OIS products in mid and high-end smartphones in the Chinese market as the gyro rate is consistently increasing in the region.
Apart from this, InvenSense is extremely pleased with the growing trend in its ultra-low power Six-Axis and Nine-Axis SoCs solutions that continues to yield a high return in the growing markets along with the proprietary automatic activity recognition software which is identically placed in these markets. Also its sensor and software roadmap is rather appealing; that will certainly gain more market share in the emerging markets in the upcoming quarters.
All in all, the company looks strong as it is increasing the overall production level at its existing as well as new customer in various regions with greater diversification and scale should drive its growth going forward. Also it has achieved a significant growth during the quarter and the company expects its strategic initiatives to boost its growth in the current quarter and in the upcoming quarters.
Conclusion
InvenSense is currently trading at the forward P/E of 21.35 with PEG ratio of 1.24 expected for the next five years indicate potential growth for the company in the coming years. Moreover, the analysts have estimated CAGR of 25.63% higher than that of industry average CAGR of 15.25% for the next five years indicate tremendous growth opportunity for the company in the future.
