What happened
Shares of Himax Technologies (HIMX -0.60%) rose 86.7% in November, according to data from S&P Global Market Intelligence. The company's stock skyrocketed thanks to an improving business outlook and record momentum for the broader market.
Himax delivered strong third-quarter results last month, and comments from management indicate that the business could be heating back up. The S&P 500 index also posted its biggest ever November gains last month and the momentum helped the semiconductor company post its best monthly stock performance in years.
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So what
Himax published third-quarter results on Nov. 12, posting sales of $239.9 million and adjusted earnings of $0.07 per share. Sales for the period climbed roughly 28% sequentially and 46% year over year. Adjusted earnings for the period were up 625.9% sequentially and 281.6% year over year.
The strong performance didn't come as much of a surprise because the company had published preliminary numbers for the period early in October, and the actual results were closely in line with those figures. However, it was undeniably a great quarter for the company, and management laid out targets for strong performance in Q4.
Now what
Himax is guiding for sales to increase roughly 10% sequentially in Q4. In the context of the strong performance in the third quarter, that sounds pretty good. It also guided for adjusted earnings between $0.15 and $0.16, up roughly 72% year over year at the midpoint of the target.
Himax's core business tends to be somewhat cyclical, with demand and pricing power for its display-driver chips tending to fluctuate based on trends in the smartphone and television markets. Based on recent performance, comments from management, and product upgrade cycles driven by new technologies, it looks like the business is moving into a stronger phase than investors have been used to in recent years. The company also has 3D image-sensing solutions in the works that could be a big growth driver, and management has indicated that it's been racking up design wins in this category.
Himax remains a somewhat speculative investment. However, for risk-tolerant investors, the stock still trades at levels that leave room for big upside. The company has a market capitalization of roughly $1.15 billion and is valued at roughly 1.3 times this year's expected sales and 23 times expected earnings.
