Himax Technologies Inc. (HIMX, Financial) is a pure-play for augmented reality with its industry-leading WLO, Front-Lit LCOS microdisplay and CMOS image sensor. The company failed to find its way into the green in 2016 as the stock was down more than 25%. Regardless, the stock is off to a good start heading into 2017 as it is up almost 15% year to date.
Recently, the company reported fourth-quarter results. For the quarter, Himax reported earnings per share of three cents, missing the estimates by four cents. On the other hand, revenue came in at $203.44 million, beating the consensus by $0.84 million. That figure also represents a surge of 14.3% year over year.
For the year, the company’s gross margin came in at 24.2%, up from 23.6% in 2015. The gross margin growth was mainly due to a more favorable product mix in small as well as mid-sized driver ICs, escalated LCOS and WLO shipments for augmented reality applications.
Per a forecast report from grandviewresearch.com, the augmented reality (AR) market is projected to grow to $100.24 billion by 2024. The AR market is likely to display extensive growth due to rapid innovations in hardware technologies as well as elegant mobile software.
As a matter of fact, AR has been successfully used in marketing and PR initiatives for several media campaigns. The continued adoption of AR technology by the entertainment industry is anticipated to boost the market in the years ahead.
Considering the positive outlook, Himax appears to be in a great position to benefit from the trend of augmented reality. Currently, the company supplies LCOS microdisplays for Optinvent, Google Glass, Microsoft Hololens and others.
Microsoft (MSFT, Financial) has already introduced its $3,000 Hololens for developers and business customers. It is still preparing to launch the customer edition of the Hololens, which will be available for a comparatively lower price than the developer edition. It is important to note the Hololens incorporates mixed reality in addition to virtual reality.
Himax's sales endure to grow at a healthy pace. Sales in China, however, are the key catalyst of its growth. In China, the company’s IC business for large panels surged over 10% year over year throughout the fourth quarter. Moving ahead, the company continues to add new clients in China, Korea and Taiwan.
Summing up
Himax’s stock price fell to its 52-week low level from its 52-week high over the past few months, but it looks like the stock is again headed in the right direction. Considering the positive outlook for 3-D sensing and the company’s WLO-DOE solution, analysts at Nomura upgraded Himax Technologies to buy from neutral.
On the other hand, AR is still in its infancy, but is projected to grow at a rapid pace in the years ahead. Himax Technologies has been working on this particular technology for about 15 years and currently works with numerous clients.
As an outcome, Himax technologies currently trades at $6.94 a share, presenting a strong buying opportunity for investors.
Disclosure: No position in the stocks mentioned in this article.
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