What Lies In Store For InvenSense (INVN) In Q1 Earnings?

InvenSense, Inc. (NYSE:INVN) , a leading provider of motion tracking devices, is slated to report first quarter fiscal 2017 results on Jul 28. Last quarter, the company posted a negative earnings surprise of 14.29%.

Let’s see how things are shaping up for this announcement.

Factors to Consider

InvenSense reported a weak fiscal fourth quarter. Also, management issued a weak fiscal first-quarter guidance, which indicates poor demand.

For the fiscal first quarter, InvenSense expects total revenue in the range of $58–$62 million, representing a sequential decrease of 24.0% at the midpoint. On a non-GAAP basis, gross margin is likely to be 45%–46%.

Non-GAAP loss per share is projected in the range of 5 cents to 7 cents, while GAAP loss per share is expected in the range of 13 cents to 15 cents.

However, we believe that the company’s growth initiatives including increased software content, market diversification and new sensors built are the positives.

Additionally, with technological advancements, demand for console and portable video gaming devices, digital still and video cameras, smart televisions, 3D mice and navigation devices is growing. InvenSense’s chips target all these product categories and hence should experience demand growth, in our opinion.

Increasing competition and uncertain demand patterns remain headwinds.

Earnings Whispers

Our proven model does not conclusively show that InvenSense will beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.

Zacks ESP: Both the Most Accurate estimate and the Zacks Consensus Estimate stand at a loss of 14 cents. Hence, the difference is 0.00%.

Zacks Rank: InvenSense’s Zacks Rank #3 when combined with a 0.00% ESP makes surprise prediction difficult.

We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Stocks to Consider

Here are some stocks, which you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Open Text Corp. (NASDAQ:OTEX) with an Earnings ESP of +1.10% and Zacks Rank #1.

Silicon Motion Technology Corp. (NASDAQ:SIMO) with an Earnings ESP of +18.84% and Zacks Rank #1.

Charter Communications, Inc. (NASDAQ:CHTR) , with an Earnings ESP of +404.76% and a Zacks Rank #2.