Technology Stocks

This is Why Himax Technologies, Inc. (NASDAQ:HIMX) Is Down By 70% For The Year

Himax Technologies, Inc. (NASDAQ:HIMX) has lost more than 70% in market value since the start of the year.  The underperformance comes amidst growing concerns about a slowdown in the company’s core business.

Sales for the company’s displays drivers have continued to edge lower this year. Adoption of the company’s 3D sensing chips has also continued to lag expectations.

A slowdown in the company’s core business is the main reason behind the recent slump that has seen the stock lose roughly two-thirds of its total market value. The stock also sold off, after Q3, earnings result indicated softening demand for the company’s core products in the Chinese handset market.

Himax Technologies price Analysis

The stock looks set to end the year on the low after plunging below a critical support level. Over the past four years, Himax has traded in a tight trading range of between $6 and $12 a share.

Source

Increased short selling pressure has seen the stock break out of a tight trading range.  With the stock trading at the $3 a share handle, amidst weakening fundamentals, all indications is that the stock could plunge to six year’s lows to the $1 a share level.

For the stock to resume the upward run, it first needs to rally and stabilize above the $6 a share level back to the multi-year trading range.

However, recent developments indicate that the stock could remain under pressure much longer.

Sales Miss

Sales missing estimates in the recent quarter appears to have spooked investors fuelling concerns about growth prospects. The fabless semiconductor company reported sales of $188.4 million for Q3 representing 4.4% year over year decline.  Sales also missed estimates by roughly $8.2 million. Earnings on the other hand came in line with consensus estimates at $0.03.

The company has already acknowledged that traditional discrete display will continue to experience declines in Q4. The display driver for a tablet is also experiencing weak market demand pointing to further sales decline in Q4.

Amidst a slowdown in revenue growth, The Chief Executive Officer, Jordan Wu remains confident that the company will post impressive numbers in Q4 and next year. The company projects single-digit growth for large driver ICs for Q4.

“We are confident that we are moving out of the trough and will deliver better performance in the fourth quarter and next year. We are seeing solid growth momentum in the areas of TDDI, WLO and large display driver IC in the fourth quarter, despite the prevailing weak sentiment in the overall consumer electronics and in particular the smartphone market,” said Mr. Wu.

Himax has had to tweak its core business as it looks to adapt to changing market trends.   For that reason, the management expects the large display driver IC to be a key driver of the bottom line given the strong demand from Chinese panel makers.  The newly added foundry capacity should improve order fulfillment, which should lead to double-digit growth of TDD revenue

Share Purchase Plan

In what is seen as an attempt to take advantage of the recent share price plunge the company has confirmed a new share purchase plan. The company’s Chairman, Dr. Bingeing Wu will reportedly spend $5 million in the  purchase the company’s American Depository Shares in Open market

What Next For Himax Technologies

Himax Technologies slump looks set to continue given the weakening underlying fundamentals.  Declining display drivers sales is a point of concern that will continue to rattle investors.

Until the company affirms solid growth in its new areas of TDDI, WLO and large display driver IC, the stock looks set to remain under pressure in the market.

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