Himax Technologies, Inc. (ADR) (NASDAQ:HIMX) has left bear Oppenheimer analyst Andrew Uerkwitz finding that after the company’s third quarter earnings, it is “time to ask the hard questions” here.
The display technology maker saw a 30% quarter-over-quarter rise in total revenues in its third quarter, which simultaneously marks a 10% year-over-year dip. Large driver saw a 24% year-over-year decline, which the analyst attributes to obsolete products. Small and medium driver meanwhile waned 12% year-over-year, where smartphone driver saw a 30% year-over-year fall, a result of share loss to TDDI as well as OLED drivers. Notwithstanding one-time reimbursement in the third quarter, non-driver stumbled 11% year-over-year. Since posting its third quarter print, the company has lost roughly 7% in value.
On the heels of the third quarter, the analyst reiterates an Underperform rating on HIMX stock with a $4 price target, which implies a close to 59% downside from where the stock is currently trading. (To watch Uerkwitz’s track record, click here)
After the quarter, in reflection of two one-time items, the analyst has bumped up his full year revenues from $676 million to $698 million and non-GAAP EPS from $0.07 to $0.21.
On a positive note, Uerkwitz acknowledges, “We have a lot of respect for Himax and what they’ve accomplished. We respect their technology.”
Yet, respect is not everything, and in the bigger picture, the analyst explains, “Our Underperform is based on our view of fundamentals, future opportunity, and valuation. We’ve tried to engage with management. but have not been able to start a conversation with them […] Following the 3Q print, we queued up to ask a question on the call; we also reached out via email. In both cases, we didn’t get a response to our questions. So here, we ask our questions to management again. On the following pages we highlight management quotes from the earnings call, provide our view and questions. We believe these are questions that should be asked by all HIMX investors.”
In a nutshell, “We believe consensus reflects unrealistic optimism in management’s ability to execute the plan to commercialize the ‘total 3D sensing solution’ for Android OEMs in 2018. Based on valuations, we believe investors are overlooking the risks vs. its peer group,” contends Uerkwitz.
Worthy of note, this analyst is the sole bear in a camp full of bulls on the Street rooting for the tech player’s success, as TipRanks analytics demonstrate HIMX as a Buy. Out of 5 analysts polled by TipRanks in the last 3 months, 4 are bullish on Himax stock while 1 is bearish. With a return potential of nearly 11%, the stock’s consensus target price stands at $11.00.