Chardan Upgrades Himax To Buy, $13 Target On Coming Microsoft Hololens

In a report published Tuesday, Chardan Capital analyst Jay Srivatsa upgraded the rating on Himax Technologies, Inc. (ADR) HIMX to Buy, with a price target of $13, following checks that suggest that Microsoft Corporation MSFT would release Hololens with the launch of Windows 10, later in July. The analyst believes that Himax Technology is the provider of Hololens' LCoS Microdisplays. Given that Hololens uses two driver ICs to support two viewing lenses, the contract would be twice as large for Himax, as compared to the erstwhile Google Glass. "If the timeline of MSFT's introduction is consistent with our checks, we could expect HIMX to begin modest ramp in Q3:15 and more so in Q4:15 with full production in FY:2016," analyst Srivatsa said. The incremental revenue from the two IC drivers is estimated at $20-$30 million for 2H:15, with a potential for growth to $80-$120 million for FY:16. In addition, given the gross margins expected for these drivers, the analyst believes that the Microsoft contract could also lead to significant earnings improvement as well. "While we still believe that despite the LCOS ramp, the company may fall short of its FY:15 goal, we view an announcement by Microsoft and subsequent ramp of LCOS could provide material upside to HIMX stock from current levels," Srivatsa added.