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2 Under-the-Radar Tech Stocks Up 30% Over the Past 3 Months

By Chris Neiger - Apr 1, 2016 at 6:00PM

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Himax Technologies and ORBCOMM are going after virtual reality and the Internet of Things.

Image source: Microsoft. 

It's easy for tech investors to get caught up in keeping tabs on the Apples, Alphabets, and Amazon.coms in the market, but there are plenty of small tech players bringing in big gains for investors.

Himax Technologies (HIMX -1.17%) and ORBCOMM (ORBC) are two such companies. The stock prices of both companies have skyrocketed more than 30% over the first three months of this year.

So, let's take a quick look at what these companies do and whether they can continue their trajectory. 

What Himax Technologies does
Himax is based in Taiwan and is a fabless semiconductor company that also makes image processing technology for displays. The company sells most of its technology to consumer electronics companies and is rumored to have a spot in Microsoft's Hololens augmented reality headset.

The company has a market capitalization of about $2 billion and full-year 2015 revenue of $690 million.

Microsoft is expected to use Himax's micro-display technology in the headset, as well as wafer level optics (WLO) in the device. Grabbing a spot in the HoloLens could bring in $80 million to $120 million in revenue for the company in fiscal 2016, according to analysts at Chardan Capital Markets.

Himax is flying high so far this year based mostly on its virtual reality and augmented reality prospects. Microsoft's HoloLens is certainly contributing to that, but it's worth noting here that the stock popped for a while when investors were excited about Himax's technology being incorporated into Google Glass.

Investors seem to be forgiving the company for a year-over-year revenue decline of 17% from fiscal 2014 to fiscal 2015. The drop came mainly from a decrease in revenue from its digital camera solutions -- specifically, its complementary metal-oxide semiconductor (CMOS image sensors), which convert light into electrons for cameras. 

Investors may have chosen to look the other way because of Himax's virtual and augmented reality business prospects, but it's still unclear that potential will be able to carry the company's business forward. 

What ORBCOMM does
Orbcomm provides Internet of Things (IoT) and machine-to-machine (M2M) solutions like network connections, device management, and analytics for mobile and fixed devices in the transportation, heavy equipment, maritime, oil and gas, utilities, and government sectors. The company also has satellite automatic identification technology that can track ships at sea for government and commercial companies. Orbcomm sells its technology to original equipment manufacturers (OEMs), the government, and directly to end users. 

The company also has the world's first, and only, commercial satellite network entirely dedicated to M2M communications. The low-orbit satellites allow for reliable M2M communications, and its most recent satellites were launched by SpaceX back in December. ORBCOMM has a market cap of just $702 million and $178 million in revenue for 2015.

Aside from its successful launch of its satellites late last year, it appears the company's stock price started its significant uptick after the company announced that Lockheed Martin's Aeronautics Division would start using ORBCOMM's radio-frequency identifier IoT platform.  

And that investor confidence was pushed even higher by the company's 85% year-over-year revenue increase for the full-year 2015.

A series of customer wins so far this year, along with momentum from 2015, led ORBCOMM's CEO MarcEisenberg to say, "With our flexibility, dynamic capabilities and global footprint, backed by our incredible technical strength, ORBCOMM is well positioned for 2016 and beyond."

Will the ride continue?
According to TrendForce, the virtual reality market is expected to grow to $70 billion by 2020, up from just an estimated $6.7 billion this year. And Digi-Capital expects the combined augmented reality and virtual reality markets to be worth $150 billion by 2020.

That all bodes well for Himax, but investors should remember that the company isn't just a virtual reality play, and so far, it appears the company's stock has hitched itself to the possibility of the Hololens' popularity -- and we all know how that ended up for Google Glass. Investors should continue to look for new revenue streams outside of the virtual reality market, at least until Himax can prove that it can bring in substantial revenue from that market.

As for Orbcomm's opportunity, the Internet of Things will be worth an estimated $7 trillion by 2020, according to IDC. And the company's dominant position in the M2M space could certainly help keep ORBCOMM moving in the right direction. The company's new partnerships, along with its increasing revenue, indicates that ORBCOMM is on the right track and could see more growth as it moves forward. If I had to pick between the two right now, I think ORBCOMM's prospects look a bit more solid at the moment than Himax's.

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Himax Technologies, Inc. Stock Quote
Himax Technologies, Inc.
$9.31 (-1.17%) $0.11
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