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Why Shares of Himax Technologies Fell 17.9% In July

By Nicholas Rossolillo – Aug 4, 2021 at 4:12PM

Key Points

  • Himax has been a top chip stock as it benefits from strong demand for digital displays.

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Consumer electronics demand has been sky-high, and Himax stock simply took a breather last month.

What happened

Taiwanese semiconductor company Himax Technologies (HIMX 1.13%) fell 17.9% in July. That doesn't tell the whole story, though. The designer of display drivers is having a fantastic showing in 2021. The stock was up 85% year to date and 414% since the start of 2020 in spite of the cool off in July, slightly retreating from all-time highs notched for the tech stock in late June.  

So what

A boom in global demand for consumer electronics is behind Himax's epic rise since the start of the pandemic. Himax is a leading developer of the circuitry that controls digital screens -- everything from smartphones to TVs to infotainment displays in cars. A global shortage of chips has put a slight damper on Himax's financial results as it has the rest of the semiconductor industry. Nevertheless, households and businesses have been scrambling to purchase new devices as COVID-19 has reshaped daily life and centered it on technology. 

A person holding a smartphone while watching TV.

Image source: Getty Images.

Himax reported year-over-year revenue growth of 67% to $309 million during the first quarter of 2021. As a result, net profit went from a negligible amount a year ago to a robust $66.9 million.

Now what

Himax will report financial results for the second quarter of 2021 on Aug. 5, and it had previously forecast a 15% to 20% rise in revenue over Q1. If the company delivers, it will at the very least help reinforce the huge run this chip stock has experienced since last year.

Besides display drivers, Himax is also developing adjacent circuitry technologies like 3D sensing, which it hopes will help it break into other markets like augmented- and virtual-reality devices and advanced driver assist systems for the auto industry. However, while Himax has been working on these strategic areas for years, it is still largely tied to display sales. As such, this has historically been a cyclical stock that follows consumer electronics trends. Sooner or later, booming sales at Himax will eventually moderate. For now, this is one white-hot chip design company that should continue to benefit from the global semiconductor shortage.

Nicholas Rossolillo and his clients have no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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