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 (NASDAQ:HIMX), a provider of semiconductor components for flat panel displays, sank on Tuesday following a two-notch downgrade from Bank of America/Merril Lynch. As of 12:30 on Tuesday afternoon, the stock was down about 9.5%.
So what: Previously a "buy" rated stock at Bank of America, with the bank calling Himax its top 2015 pick among display integrated circuit providers back in January, Himax has been downgraded all the way to underperform, with the bank's target price dropping to $7. Himax trades around $6.75 after the decline in the stock price today. Over the past 52 weeks, the stock has ranged from $15.40 to $5.70, according to S&P Capital IQ data.
This downgrade comes one day after another firm, Northland Securities, published concerns that Himax's first-quarter results could come in at the low end of the company's guidance, citing many of the same concerns as Bank of America, including Chinese market share and sales of Samsung phones.
Now what: Analyst upgrades and downgrades should always be taken with a grain of salt, and these downgrades come after Himax stock has already declined by more than 50% since the beginning of 2014. The stock now trades at about 15 times analyst estimates for 2015 earnings, putting the P/E ratio far lower compared to when the stock peaked last year.
Himax is highly dependent on sales of TVs, monitors, and smartphones, and the analysts' concerns are certainly valid. But buying and selling stocks based on analyst upgrades and downgrades is rarely a good idea.