Himax Gets an Upgrade as Put Buyer Places Big Bet

After reporting another disappointing quarter, Himax Technologies (NASDAQ: HIMX) is becoming a compelling trade again. If the company’s positive pre-announced guidance signals strength, then the stock could move up again.

Himax forecast revenue, gross margin, and EPS exceeding guidance. Management likely believes projects coming online with new and existing customers will now add meaningfully to results. Markets disagree because they are not bidding the stock higher. Yet there is one data point investors should note.

An options trader bought 10,000 March 2019 Puts with an exercise price of $7. The option bid for this put closed at $1.50 last week. The trade will prove very profitable if this company raises its guidance again next quarter and announces at least one big design win and contract.

So far, Himax said very little about the new contracts from high-end smartphone manufacturers, due to confidentiality. And all the company did was raise its capital expenditures to increase its capacity to meet future demand. Now that the supply side of the business is nearly complete, Himax’s management now must grow revenue as shipment for WLO-related products pick up steam.

The market is a forward-looking machine and once it believes in Himax’s growth ahead, the stock will surge accordingly.