Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Himax Technologies (HIMX 1.22%) fell more than 12% Friday on the heels of Thursday morning's earnings report, and following a downgrade by Chardan Capital Markets from neutral to sell.
So what: Himax stock opened 11% lower yesterday morning when the company reported in-line first-quarter results and weaker-than-expected second-quarter revenue guidance. However, shares recovered by yesterday afternoon after Himax CEO Jordan Wu explained the Q2 weakness was only a temporary headwind caused by "a certain end-customer's inventory position." Wu added, "We often times need to remind investors of the normal volatility in the semi industry to which we are not immune."
Now what: But that obviously wasn't enough to appease Chardan Capital's Jay Srivatsa, who previously downgraded Himax from buy to neutral in late January. Scrivatsa observes Himax's unnamed customer must be Samsung, which "appears to be struggling to compete with the white box handset manufacturers in China."
In the end, I'm inclined to believe Himax management's assertion that this pain should be temporary. And even if it's not, shares of Himax now trade around 9.8 times next year's expected earnings, so should provide investors a reasonable margin of safety going forward.
