After reporting weak quarterly earnings and giving little clarity over its business, long time shareholders may now rethink the merits of holding Himax Technologies Inc. (NASDAQ: HIMX). Shares closed below $6.00 last week (Aug. 17).
When business for small and large panel display weakened, Himax realized it had to pivot its business to something new. It doubled down its efforts in WLO and signed an agreement with Qualcomm (NASDAQ: QCOM) to develop 3D sensing. As plants and offices took more capex for Himax, the impending business for 3D sensing has yet to play out. Understandably, customers, who don’t want to be identified, are re-thinking the offering.
Only Apple (NASDAQ: AAPL) is implementing image sensing to unlock phones. Android manufacturers are collectively hesitant on adding this offering in high-end phones. As sales slow, this one offering may not re-ignite the upgrade cycle for smartphones. This uncertainty is now hitting HIMX stock. At below the $6 range last week, the downtrend could continue.
Even at a round $5.00 level, HIMX stock is expensive. Without cash flow from revenue growth in new businesses, betting on Himax entails plenty of risk. Previously, buying HIMX stock at $5 - $6 and selling between $9 - $12 rewarded traders. That range is now far from guaranteed.
Takeaway
Himax’s Q3 EPS guidance of $0.015, down from $0.03 or down 50% hurt the share price. With no revenue growth next quarter, the stock should not get rewarded a high P/E multiple. Tread carefully with this stock.
