Himax Technologies (HIMX, Financial) has been on a good streak over the last few weeks due to the company’s potential in several high-growth markets. Although the stock has rallied strongly, it has more upside to offer.
Himax reported a robust second quarter as the company reported earnings per share of 12 cents, 2 cents better than the estimates. On the other hand, revenue for the quarter came in at $201.1 million, $2.49 million better than the estimates and a surge of 18.8% year over year.
The company said the sequential growth was primarily due to the sturdy sales in small and medium-sized driver IC, mainly surged order flow from its Chinese smartphone customer base and its requirement for higher resolution display drivers.
On the other hand, the revenue generated from large panel display drivers was $67.5 million, a surge of 24.4% year over year. That figure accounted for approximately 34% of Himax’s entire revenue and 4K TV demand in China was responsible for the majority of the growth. This clearly suggests that the company’s stellar run is just getting started.
Furthermore, the company reported that the AR (augmented reality) is gaining a lot of media attention, and people are also getting to know about augmented reality, chiefly after the release of Niantic’s "Pokémon Go." The company also said it is well positioned to gain huge advantages because it is formerly working with 30 customers in the augmented reality industry and has been working on this technology for 15 years.
Moving onward, the company’s management believes augmented reality will play a significant role in surging the revenue generated from liquid crystal on silicon (LCOS) and wafer-level optics (WLO) in the prevailing half of this year.
The company has been working on this technology for 15 years, and that has led it to bring in some important design wins this past year. It is likely that Himax’s HX8396-A display driver IC will be equipped in the new Lenovo Phab 2 Pro, which will be the first augmented reality-based smartphone around the globe.
Not only this, the company will possibly have a chance to achieve a significant spot in Microsoft’s imminent AR headset known as HoloLens. This could be high enough to augment significant contribution to the company.
Conclusion
Himax Technologies in gaining traction is several markets and has more upside to offer due to its growth potential.
Disclosure: No position.
Start a free seven-day trial of Premium Membership to GuruFocus.
