Red flags were thrown up by Rosenblatt analyst Jun Zhang regarding the prospects of Himax Technologies, Inc. (ADR) (NASDAQ:HIMX). The analyst downgraded HIMX from Neutral to Sell, while lowering the price target from $7.00 to $6.00, which reflects a potential downside of 32% from yesterday’s closing price. (To watch Zhang’s track record, click here)
Zhang highlights 4 short-term headwinds for Himax:
- TV shipment cuts – “We believe TV inventory levels were around eight weeks by the end of June and will continue to negatively impact TV panel shipments in Q3.”
- Weakness in the low/mid- smartphone market – “We are expecting China’s smartphone market to be below typical seasonality this Q3 following OPPO cutting its mid-end shipment target within the last two weeks.”
- Shrinking TAM for LCD panel driver ICs – “We do not believe Himax’s TDDI solution secured design wins at BOE and Tianma and now expect Himax’s TDDI shipment to only be a few hundred thousand per quarter.”
- WLO/DOE role is less important – “In our view, Himax is an indirect supplier of DOE to Taiwan Semi (Xintec/Visera) (TSM: Buy), and we do not believe revenue contribution will be meaningful enough to offset the weakness in panel driver ICs in 2H17.”
Out of the 5 analysts polled in the past three months, 3 rate Himax stock a Buy, while 2 rate the stock a Sell. With a downside potential of 14%, the stock’s consensus target price stands at $7.60.