Why OmniVision Technologies Inc. Shares Surged

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 semiconductor image-sensor company OmniVision Technologies  (NASDAQ: OVTI  ) soared 14% today after its quarterly results and outlook impressed Wall Street.

So what: The stock has rallied sharply in recent months on signs of rebounding demand, and today's fourth-quarter results -- net income spiked 70% on a revenue decline of just 1.6% -- coupled with upbeat guidance only reinforce those good vibes. In fact, gross margin during the quarter increased 260 basis points to 20.1%, suggesting that OmniVision's cost structure and competitive position are improving as well.

Now what: Management now sees current-quarter adjusted earnings per share of $0.43-$0.63 on revenue of $360 million-$400 million, well above the consensus of $0.29 and $305 million. "We have made meaningful progress on multiple fronts, including the diversification of our revenues into multiple geographies, especially in Asia, and the strong growth in our emerging automotive and security markets," said CEO Shaw Hong in a press release. "We are also working on new technologies and applications in our core and emerging markets that have the potential to substantially enhance our market position over the longer term." Of course, with the stock now up about 70% from its 52-week high and trading at a P/E in the mid-teens, I'd wait for a wider margin of safety before betting on those prospects. 

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  • Report this Comment On May 30, 2014, at 3:31 PM, zacksateurlunch wrote:

    u guys were asleep on OVTI....whereas Zacks had

    a #1....duh!

    Stop foolin around you motley fools and show your class...

  • Report this Comment On June 04, 2014, at 5:52 AM, gtcoogee wrote:

    I respect Motley. You guys are very smart, and thoughtful. You missed the boat on this call. I almost felt like you guys were biased against. Not sure what the story is, but if someone is paying to snuff, we should know. In a previous article just before earnings, not once was it mentioned how strong the balance sheet is. Not once. That is an elephant, impossible to ignore. Why was it not mentioned? I am disappointed with the Motley after this episode. I will continue to read, but now with a more careful lense.

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