Himax Technologies Slips to Sell - Analyst Blog

Zacks Investment Research downgraded Himax Technologies, Inc. HIMX to a Zacks Rank #4 (Sell) from a Zacks Rank #3 (Hold) on May 30, primarily due to downward estimate revisions in response to soft first-quarter 2014 results announced on May 8.

Why the Downgrade?    

Himax's first quarter earnings of 7 cents per share as well as revenues of $195 million were roughly in line with the Zacks Consensus Estimate. But the investors were disappointed by its weak guidance. The company said that it expects current-quarter revenues to be flat as a result of inventory buildup at one of its major customers, and earnings per share is expected to lie between 13.2 to 15.2 cents.
    
The stock saw a strong uptrend in the past year based on reports that it is the supplier of LCOS displays for Google Inc.'s (GOOGL) ground-breaking product Google Glass. But as time passed by without any formal announcements from Google, investors and analysts grew anxious, pulling the stock price down by 54% since the beginning of this year. Moreover, analysts are not expecting Google Glass to boost Himax's revenues this year, as Himax recently declared that it is unlikely to ramp up its LCOS panel capacity in 2014.

Furthermore, Himax's prospects in the fast-growing Chinese and Korean markets face competitive headwinds, which could result in margin erosion in the coming quarters. Its outlook for the small and medium-sized driver segments is weak as well.

Himax has witnessed downward estimate revisions for the current year with estimates going down in the past 30 days. The Zacks Consensus Estimate for 2014 has fallen from 57 cents per share to 47 cents during this period, while it dropped to 64 cents per share from 83 cents for 2015.

Other Stocks to Consider

Better-ranked stocks in the industry  include Applied Micro Circuits Corp. AMCC and Exar Corp. EXAR, each sporting a Zacks Rank #1 (Strong Buy).

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