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 Himax Technologies (HIMX 4.23%), a semiconductor developer for flat screen devices, shed as much as 12% after the company reported second-quarter earnings results.
So what: For the quarter, Himax saw revenue advance 9% to $207 million from $189.5 million in the year-ago period while adjusted EPS rose to $0.12. Comparatively, EPS came in $0.01 ahead of expectations while revenue expectations were a tad shy of the Street's estimate of $208.6 million. The big driver in delivering its highest quarterly revenue total in practically five years was chip demand for small and medium flat-panel devices (keep in mind, Himax's chips are going to be used in Google Glass), where revenue rose by 32%. Looking ahead, though, Himax sees third-quarter revenue falling 5% to 12% from second-quarter levels, implying $182 million to $197 million in sales. The Street had been looking for a much more robust $218.8 million figure instead.
Now what: Today's move lower is somewhat confusing because investors really expect Himax's revenue to be taking off. The truth is that large display chip sales still account for about a third of Himax's total sales and this portion of its business is really struggling. Some of this has to do with the seasonality of large device sales (e.g., televisions), while the other aspect is just weak demand. Google Glass also has the potential to be a game-changing new technology, but it's going to take some time to get sales off the ground. With that being said, the hype surrounding Himax over the past few months compounded with a surprisingly weak third-quarter forecast gives me cause to take a step back and watch this company from afar in the meantime.
