Please ensure Javascript is enabled for purposes of website accessibility

Why Himax Technologies Stock Jumped 28.3% in January

By Keith Noonan - Updated Feb 8, 2021 at 9:06AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The display technology company is showing impressive momentum, and it could have big growth drivers in the wings.

What happened

Shares of Himax Technologies (HIMX 0.16%) rose 28.3% in January, according to data from S&P Global Market Intelligence. The display technologies stock is surging on signs of unfolding growth opportunities and indications that the company's core business could be at the start of a comeback. 

HIMX Chart

HIMX data by YCharts.

Himax Technologies' core business hinges on the sale of display driver chips, which regulate the colors shown by pixels on visual displays. The company's stock has surged 194% over the last year thanks in large part to improving demand and pricing power for these products, and efforts to grow the business in new product categories also appear to be yielding results. 

A person using a tablet and augmented reality to envision a living room layout.

Image source: Getty Images.

So what

The display driver market is cyclical and tends to be relatively low margin at low points of the business cycle, but it looks like some positive trends in the smartphone, tablet, television, and automotive display categories are powering a major resurgence for Himax's business.

Business performance in 2018 and 2019 was generally weak amid low demand for its display drivers, but the company's research and development teams were also working on designs for machine-vision solutions, augmented reality, and other potentially high growth categories. These expansion efforts have yet to generate big sales, but momentum looks to be picking up.

Now what

Himax stock has continued to make big gains early in February's trading. The company's share price is up roughly 21% in the month so far following strong quarterly results. 

HIMX Chart

HIMX data by YCharts.

Himax published its fourth-quarter results on Feb. 3, with sales growing 57.7% year over year to come in at $275.8 million, and adjusted earnings up approximately 170% to reach nearly $0.20 per share. The company's sales and earnings came in roughly in line with the average analyst expectations, but also significantly above management's own targets.

Himax also gave an encouraging near-term performance outlook. The company sees an upswing of demand in the semiconductor market helping to boost margins, along with potential contributions from non-display-driver products for artificial intelligence and 3D sensing solutions. 

The company now has a market capitalization of roughly $2.3 billion and trades at approximately 17 times this year's expected earnings and two times expected sales. Those metrics still look relatively attractive despite the recent rally, but investors have to keep in mind that Himax's business has tended to be pretty cyclical. There's potential for more big growth, but whether the company will continue to see big demand tailwinds power strong performance remains somewhat uncertain. 

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Himax Technologies, Inc. Stock Quote
Himax Technologies, Inc.
HIMX
$9.39 (0.16%) $0.01

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
330%
 
S&P 500 Returns
115%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/23/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.