Through the past three quarters, Himax Technologies (HIMX, Financial) has managed to grow its revenue mainly due to the gradual rise in the virtual reality and augmented reality markets. The primary reason behind the company’s progressive growth was its robust sales in small as well as medium-sized driver IC.
The robust sales were mainly due to the strong orders from the company’s smartphone customer base and the demand for higher resolution display drivers. Moreover, in the most recent quarter, the company observed considerable growth in all of its business segments as revenue from large panel display drivers and small-medium sized surged 24.4% and 9.4%.
The main reason behind the growth of large-panel display drivers was the strong 4K TV demand in China, whereas the strong sales of small-medium sized was due to smartphones.
Moving onward, the company anticipates gaining huge benefits from the continuously escalating AR trend, mainly after the launch of Niantic’s "Pokémon Go." It also publicized that it is currently working with 30 customers in this specific industry with an experience of more than 10 years.
It is true that VR could be big soon, but AR is touted to be much bigger than VR. That being said, it will take a long time for the industry to grow to its potential. Many huge tech companies, such as Microsoft (MSFT, Financial), are placing their attention on the AR/VR market, especially on the AR market. It is highly likely that AR-based efficient headsets will be launched next year.
According to digi-capital.com, the AR market is projected to reach $90 billion by 2020, whereas the VR market is expected to reach $30 billion by the end of the decade. This represents a golden opportunity for Himax over the long run.
Most significantly, it is likely that Microsoft will use Himax’s products in its HoloLens. At present, HoloLens is only available for developers, but as soon as Microsoft releases a public version, Himax will benefit from massive advantages.
Conclusion
Himax Technologies is nicely positioned to benefit from the AR and VR market. The company can leverage its relationship with Microsoft to take giant leaps forward in this booming space as Microsoft is spending heavily to gain an early mover’s advantage. While Himax’s fundamentals aren’t that appealing, the stock is a great speculative bet for investors looking to benefit from the growth of AR and VR.
Disclosure: No position.
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