Shares of Taiwanese fabless semiconductor company Himax Technologies, Inc. (ADR) (NASDAQ:HIMX) were sent into a tailspin yesterday after Nomura analyst Donnie Teng downgraded his rating on the stock from Buy to Neutral, and chopped the price target from $12 to $10.20.
Himax plunged nearly 20% to $8.63 with 22.07 million shares changing hands.
Himax provides the liquid crystal on silicon and wafer level optics for virtual reality (VR) and augmented reality (AR) products, including Microsoft Corporation (NASDAQ:MSFT)’s HoloLens headset.
HoloLens currently ships in a Developer Edition for $3,000 in USA and Canada.
Weaker shipments for VR/AR products to affect Himax Technologies, Inc. (ADR) (NASDAQ:HIMX)
Recent checks apparently convinced Teng that offtake of the major AR device may not really reach meaningful levels until the latter half of 2017.
This could affect HIMX adversely despite rising prices for the components that the company supplies – hence the downgrade.
Nomura was therefore cagey about continuing its Buy rating, saying “there is not enough upside to sustain our previous Buy rating and TP, especially as shipments may disappoint again and the stock is at 26x 2017F P/E now.”
Himax Technologies, Inc. (ADR) (NASDAQ:HIMX): Long term potential
Back in May, Himax CEO Jordan Wu said that AR was “just the beginning of a long-term growth story,” and earlier, that “the evolving AR market could become a multi-billion dollar industry.”
According to one estimate, the AR market could well reach a size of $90 billion by 2020.
On a long term view, HiMax may therefore benefit from its early mover advantage in the AR industry.
Looking at the long term monthly chart of HIMX, it is clear that there exists very strong support in the region of $6, though recent advances have met with selling at higher levels.
Investors may like to wait for the shares to correct further, considering they have already advanced over 51% from the 52-week low of $5.69.