This Bear Believes Himax Technologies, Inc. (ADR) (HIMX) 3D Sensing Revenue Targets for 2018 Are Unattainable

Rosenblatt's Jun Zhang believes HIMX's opportunities to generate revenue next year will prove "insufficient."


With a 3D sensing opportunity at play as augmented reality (AR) applications leap to the forefront, three-dimensional sensors utilize depth sensing to bridge tech devices to a real-world experience for consumers. Yet, why does a bear sound off strongly against Himax Technologies, Inc. (ADR) (NASDAQ:HIMX)?

Rosenblatt analyst Jun Zhang warns that this Taiwanese fabless semiconductor firm is facing “insignificant” 3D sensing revenue coming next year.

As such, the analyst reiterates a Sell rating on HIMX stock with a $6 price target, which represents a nearly 54% downside from where the shares last closed. (To watch Zhang’s track record, click here)

With a “core business remaining weak,” Zhang fears that no positives that lie ahead, not even 3D sensing adoption at Xiaomi, maker of some of China’s leading smartphones, will be enough to make up for a crumbling core business. For a company that Zhang doubts can capture wafer-level optics (WLO) technology market share at Apple, the HIMX team’s 3D sensing 2018 revenue target of $40 million each month set based on hitting 2 million in monthly capacity just seems like an overshot to the analyst.

Zhang continues to be skeptical on the tech player, elaborating: “In our view, Himax set unachievable 3D sensing revenue targets in 2018 and we do not believe the company can take WLO share at Apple […] in 2018. We also believe that revenue generated from the diffuser business in the iPhone X’s flood illuminator module is likely insignificant. We believe it’s difficult to replace AMS’ role in the near term since AMS built a customized WLO design for the iPhone X while also providing Wafer Level Packaging for the Dot Projector.”

Meanwhile, “Although we expect Himax’s TDDI solution to start gradually ramping in 1H18 with a design win at Xiaomi, we do not believe it can offset driver IC business erosion and add that TDDI pricing could decline sharply,” underscores the analyst.

As TV and smartphone markets alike are met with more “challenges” next year, it becomes more difficult for the analyst to “see any signs of a rebound in Himax’s core business due to increasing price competition.”

Surmising that Xiaomi may choose to just utilize 3D sensing for its Mix 3 model, an opportunity that presents under 1 million units per year, Zhang contends that even in under the ideal circumstance of Himax winning capacity booking at the Chinese smartphone maker, there will remain insufficient 3D sensing revenue next year for Himax all the same.

TipRanks data compiled across the Street show a more cautiously optimistic take on this tech player than Zhang’s bearish views. Out of 7 analysts polled by TipRanks in the last 3 months, 5 are bullish on Himax stock, 1 remains sidelined, while 1 is bearish on the stock. Is the tech firm an undervalued or overvalued stock? Analyst expectations point to upside potential of close to 3% with a 12-month average price target standing at $13.33.