Can OmniVision Earnings Really Double This Quarter?

OmniVision Technologies (NASDAQ: OVTI  ) will release its quarterly report on Thursday, and shareholders are hoping for a repeat of the huge spike higher they enjoyed after last quarter's favorable report. But even with analysts expecting OmniVision earnings to double, the big question facing the maker of image sensors for smartphones and other devices is whether the mobile market has started to approach a saturation point that could lead to a slowdown in growth for the company.

If you've ever taken a picture with your phone, then you might well have used an OmniVision product to do so. Yet as the popularity of smartphones and other mobile devices increased, so, too, did the level of competition that OmniVision faces in getting its chips into the most popular consumer offerings. Will the company be able to keep its competitive edge? Let's take an early look at what's been happening with OmniVision over the past quarter and what we're likely to see in its report.

Stats on OmniVision

Analyst EPS Estimate

$0.43

Change From Year-Ago EPS

105%

Revenue Estimate

$376.58 million

Change From Year-Ago Revenue

46%

Earnings Beats in Past 4 Quarters

3

Source: Yahoo! Finance.

Can OmniVision earnings keep painting pretty pictures?
In recent months, analysts have raised their views on OmniVision earnings dramatically, with a nearly 50% boost in July quarter estimates spurring a $0.14 per share rise in full-year fiscal 2014 expectations. The stock has responded favorably, rising 21% since late May.

Just about all of the gains in OmniVision's stock recently came after its April-quarter report, in which the company managed to beat adjusted-earnings estimates by more than 50%. The sensor-maker managed to get its sensors included in a number of notebook and webcam designs, and with many of those devices in development and scheduled for release during this year's holiday season, OmniVision greatly boosted its revenue and earnings guidance, sending shares soaring.

What's particularly impressive about OmniVision's rebound is that it came despite the company's having failed to regain all the business it lost when Apple (NASDAQ: AAPL  ) abandoned its chips for its main camera, instead turning to competitor Sony. Even now, OmniVision has to fight against Sony to sell sensors to the iPhone giant, and for the most part, the most profitable business has gone to OmniVision's rival.

After that report, though, OmniVision's stock has largely lost its forward momentum. Even news earlier this month that the company had created a new 10.5-megapixel sensor with full high-definition video capability wasn't enough to give the shares more than a short-term boost before falling back once again. Much of the doubt investors are feeling is likely coming from a lack of certainty about what Apple and other mobile-device manufacturers are planning for future products, as chip placement in possible future models will be crucial in determining OmniVision's revenue growth.

In the OmniVision earnings report, watch for the company to discuss its relationships not only with Apple but also with other large customers. During Apple's period of weakness, much of OmniVision's strength has come from its relative diversification compared to other Apple suppliers, and if that continues, it could help the company bolster its prospects going forward.

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