Chip maker InvenSense’s (INVN, Financial) shares tanked to 52-week lows when the company shared its quarterly results. The company has lost almost 80% of its value in 2014, and has been constantly subjected to multiple analyst downgrades. However, after the massive fall, I think InvenSense is a great buy for opportunistic investors. I’ll tell you about the company’s prospects, but first let’s take a look the recent quarterly report.
A devastating quarter
InvenSense reported earnings per share just 5 cents, down 76% from the corresponding quarter of the previous year and far less than the 16 cents expected by the consensus. On the other hand, revenue rose 27% to $90.2 million, still below the analysts’ target of $90.4 million. The company blamed this underperformance on two things:
- Reduced profit margins for two large clients, generally assumed to be Samsung (SSNLF, Financial) and Apple (AAPL, Financial).
- Depreciation of older products, which reduced the company’s gross margin by as much as 8%.
On the contrary, the company has not decreased its fiscal full-year guidance and is focused on guarding and growing its present market share of the overall industry. Cell phones, gaming consoles and wearable gadgets were distinguished as growth opportunities, with the company implying that it could well have revenue development of more than 35% in fiscal 2015.
Looking ahead
The total addressable market for the motion sensor space has watched solid development of the wellness and wearable purchaser hardware in the previous five years, which is relied upon to develop at a CAGR of 71% from 2012-2016 and 170 million units by 2016, as indicated by IMS Research.
InvenSense has recognized the development potential in this industry and created the progressed accelerometer and 6-aixs gyroscope technology to satisfy the complex activity recognition and contextual awareness needs of the wearable devices. The company has given this most recent innovation, Mp67b, for the iPhone 6, and it is likewise supposed that the company's sensors are additionally display in the promising new iWatch. As per the projections of iPhone 6 given by Apple (around 70-80 million), InvenSense will have a significant increment in its revenues from the cell phones and wearables market. Apple has officially reported an extremely solid preorder action for its new handsets, which looks good for InvenSense.
Conclusion
The effects of missing earnings estimates are shocking. Most investors realized that Apple is truly intense on pricing so how that turned into an issue is a blunder by the CFO position. Assuredly the new CFO will take care of this issue going ahead. InvenSense shareholders have seen truly no advantage from the growth in market share. That truth appears to be inconceivably wrong and a the stock should continue to grow from here. The future capability of InvenSense is just stronger now and a good Q3 will push the stock to $20. InvenSense’s drop is a great time for opportunistic investors to load up on the stock, thereby making it a valuable buy.
