Image source: Himax Technologies.

What happened

Shares of Himax Technologies, Inc. (NASDAQ:HIMX) fell as much as 9.8% early Tuesday, then settled to trade down 6.7% as of 1:00 p.m. EST after an analyst downgraded shares of the fabless semiconductor specialist.

So what

Mizuho Securities downgraded Himax to neutral from buy today, and simultaneously lowered its per-share price target to $7.70 from $10.00. Curiously, however, Himax stock trades at just $6.72 per share after the drop as of this writing.

Recall Himax investors have grown accustomed to analyst notes swaying the stock price; shares plunged more than 19% in September, for example, after Nomura analyst Donnie Teng reduced his rating to neutral from buy, and his per-share price target to $10.20 from $12. At the time, Teng cited channel checks that indicated weak shipments of a major augmented reality device -- almost certainly referring to Microsoft's HoloLens headset, in which Himax's components play a key role -- suggesting that device may not see a meaningful ramp in shipments until the second half of 2017. And in October, Northland Capital Markets analyst Tom Sepenzis expressed similar concerns.

Now what

Sure enough, when Himax released third-quarter results last month, CEO Jordan Wu noted while the company remains optimistic for the long-term growth of its higher-margin non-driver business, it anticipates "near-term headwinds" as its LCOS and WLO product lines will see sales declines beginning in the fourth quarter and lasting into the next few quarters of 2017. To blame, according to Wu, was primarily Himax's "major AR customer's shift in focus to the development of future generation devices."

In the end, while Himax remains nicely positioned to take advantage of the eventual growth of augmented reality, it won't see the fruits of that for several more quarters' time. It's no surprise to see another analyst on Wall Street taking a step back from Himax stock today.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.