Motion tracking technologies provider InvenSense (NYSE:INVN) has increased over the last year on the back of its impressive results and the rumor that it could become an Apple (NASDAQ:AAPL) supplier going forward. But, after releasing its fiscal fourth-quarter results, InvenSense shares went down 6%, as it missed earnings estimates. But, is this a buying opportunity for investors, or is InvenSense a stock to avoid?

A weak start
InvenSense trades at an extremely expensive trailing P/E ratio of 280. So, when the company reported increased revenue of just 7% year over year and earnings of $0.07 per share, missing consensus estimates of $0.10, investors were not happy. The expectations of a stock that trades at such expensive levels are usually high, and InvenSense failed to deliver on this count.

In addition, InvenSense's guidance was also weak. The company expects revenue between $63 million-$66 million in the first quarter, but this is behind the consensus estimate of $69 million. Thus, it is easy to see why InvenSense shares dropped.

The way ahead
However, the company is confident regarding its execution and strategies. Management said that InvenSense gained significant market share in the markets it serves. Also, the company saw a steady increase in attach rates of gyroscopes in a wide variety of applications. Moving ahead, the company has laid out an impressive product roadmap that includes a new generation of always-on, context-aware devices and applications. 

With its solutions, InvenSense is looking to tap the growing market for the Internet of Things and wearable devices. InvenSense is making innovations in hardware and software, with a view to deliver low-power systems with increased performance, along with shorter time to market for customers. 

Gaining from the smartphone market
The company's product development has helped it gain adoption across several customers in mobile. The company's customers include LG, Xiaomi, and Samsung (NASDAQOTH:SSNLF). Together, these three customers are expected to account for 40% or more of InvenSense's revenue, with Samsung being the primary contributor responsible for more than 30% of the top line.

InvenSense is supplying its motion-tracking chips to Samsung for the Galaxy S5. Samsung's new smartphone is off to a great start, and it broke the launch day sales record of the Galaxy S4 by over 30%. Samsung launched the device in 125 countries, so InvenSense has a big market to capture if sales of the latest Samsung flagship continue at this pace. 

InvenSense's six-axis family products, including the MPU-6500 and 6515 Android-compatible chips, have gained good traction. They are shipping in Samsung's Galaxy S5 and wearable devices such as the Samsung Gear 2 and Gear Fit. About 70% of InvenSense's shipments in the last quarter were driven by this product family.

InvenSense is also focusing on China. The company's six-axis motion-tracking solutions and two-axis optical image stabilization products are finding good adoption in the country. InvenSense has seen an increase in gyro attach rates in mid- and high-end smartphones from companies such as Xiaomi and Oppo. The smartphone market in China is a big opening for InvenSense, as the roll out of LTE in the nation could drive upgrades from older-generation phones to new-generation devices.

Apple could be a probable customer
There's also a probability that InvenSense could provide optical image stabilization, or OIS, chips to Apple for the upcoming iPhone 6. According to Fool contributor Adam Levy:

There's one additional socket that InvenSense could win on the iPhone -- an OIS gyroscope. The burgeoning technology is used to improve smartphone camera's by stabilizing the image using a gyroscope. Samsung neglected to use the technology in the Galaxy S5, but Apple may decide to integrate it into the iPhone 6. If it does, InvenSense is a clear choice.

If this rumor turns out to be true, InvenSense shares could rise to new highs on the back of tremendous revenue and earnings growth that would come with having Apple as a client.

The bottom line
InvenSense shares dropped due to weak results. Also, the company is quite expensive considering its valuation. But, InvenSense has a forward P/E ratio of just 20, indicating good growth in earnings in the future. The company's relationship with Samsung, and the likelihood that Apple will become a customer, could be big catalysts going forward, making InvenSense's pullback an opportunity for investors to buy.

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Mukesh Baghel has no position in any stocks mentioned. The Motley Fool recommends Apple and InvenSense. The Motley Fool owns shares of Apple and InvenSense. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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