Feltl and Company Sets Expectations On Pixelworks Into 3Q14 Results

In a research report released today, analyst Jeffrey Schreiner of Feltl and Company reiterated a Buy rating on Pixelworks (NASDAQ:PXLW) with an $8.50 price target, ahead of the company’s third-quarter results, which will be reported on October 30, after the market close.

Schreiner wrote, “We believe PXLW can report in-line, or better, 3Q revenue (Feltl/Consensus estimate ~$17m) driven by the initial unit ramp of co-developed SoC projector units. In-line results would imply sequential revenue growth ~12%, and year-year growth ~11%. Based on further checks since our September 17 initiation, we believe projector market leader Epson is the co-development partner working with PXLW. Epson has ~30% market share within digital projectors and is a leader in DLP and 3LCD solutions. Prior to working with PXLW Epson developed SoC solutions in-house, thus each new model utilizing co-developed SoC is incremental share gain for PXLW. Assuming mid-point of non- GAAP GM guidance (~51.5%) and GAAP OPEX (~$10.5m) we believe PXLW can report non-GAAP EPS loss of ~$0.04, in-line with current Feltl/Consensus expectations. We see revenue risk in 3Q skewed to the upside, given initial ramp of new SoC projector units.”

The analyst continued, “Since our initiation on September 17 shares of PXLW have declined ~13.6%. We believe the pullback is without merit as PXLW did not warn regarding 3Q results, nor do we see other fundamental weakness. We estimate the majority of the PXLW decline is related to investors trying to speculate regarding potential near-term AAPL contribution. If speculators are now out of PXLW shares we believe investors can refocus on growth opportunities. Driven by the ramp in co-developed SoC projectors we see near-term catalysts present to push PXLW shares higher. With expansion into mobile and potential for future AAPL royalties layering on further growth opportunities, we believe investors should utilize recent weakness to accumulate PXLW, as we believe shares may be mispriced.”

According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Jeffrey Schreiner has a total average return of -9.0% and a 30.6% success rate. Schreiner has a -16.7% average return when recommending PXLW, and is ranked #3256 out of 3337 analysts.

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