Chardan Downgrades Himax To Sell, Says Samsung's China 'Woes' Could Hurt Revenue Guidance

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In a report published Friday, Chardan Capital Markets analyst Jay Srivatsa downgraded the rating on
Himax Technologies, Inc.
HIMX
to Sell, while reducing the price target from $5 to $4, citing Samsung's woes in China. Samsung's share of the Chinese market has contracted rapidly in the past year. The company's China sales are expected to worsen in the back half of this year. According to IDC, Samsung's smartphone shipments have plunged from 20.5 million in 1Q14 to 9.6 million in 1Q15, representing a 53 percent decline in unit sales in a year. "Our checks suggests that given the decline in sales, Samsung is revisiting its strategy in China and could likely move back to using AMOLED displays in future phones for the Chinese market," Srivatsa said. Samsung's move back to AMOLED displays from TFT LCD displays could mean "a huge blow" for Himax, since it is the primary provider of TFT LCD display drivers to Samsung. Srivatsa expects Himax's revenues from Samsung to decline from more than 10 percent in 4Q14 to low single digit percentages by 4Q15. In the report Chardan Capital Markets noted, "Given the weakening outlook for Q3:15 coupled with Samsung's inability to regain its market share position in China, we are lowering our 2H:15 estimates. HIMX had guided for FY:15 revenues to be flat from FY:14…We now project that with weak Q3:15 guidance which is likely to be ~$190 million, the company will have to lower its FY:15 revenue guidance in its Q2:15 earnings call." The EPS estimates for 2015 and 2016 have been reduced from $0.33 to $0.29 and from $0.42 to $0.40, respectively.
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Posted In: Analyst ColorDowngradesPrice TargetAnalyst RatingsChardan Capital Markets
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