Year-to-date shares of Himax Technologies (NASDAQ:HIMX) have risen by more than 55%, outperforming the Technology Select Sector SPDR Fund (XLK) substantially, as the benchmark index for the technology sector rose by a bit more than 20%.
Strong catalysts are suggesting that there is a good likelihood that the share price will continue moving up. Thus, I am bullish on this stock.
Based in Tainan City, Taiwan, Himax Technologies is a leading provider of display imaging processing semiconductor solutions, supplying several consumer electronics brands worldwide. These technologies, which consist of semiconductors for display drivers of any size, are found in electronics such as TVs, monitors, notebooks, tablets, smartphones and automotive products.
In addition to these products, the company supplies non-driver semiconductor products, such as timing controllers, to manufacturers of camera modules, optical engines and television systems. (See HIMX stock charts on TipRanks)
Q2 2021 Financial Results
In the second quarter of 2021, the adjusted earnings were $0.624 per American Depository Share, topping the consensus average by $0.16.
The total net revenue was $365.3 million for a 95.3% increase year over year, and it beat analysts’ projections by $3.25 million.
In line with the higher limit of the guidance range, the gross margin was 47.5% of the total net revenue, increasing 730 basis points from 40.2% for the first quarter of 2021.
Growth Prospects
The COVID-19 crisis has created severe disruptions in the supply chain of the semiconductor industry, limiting Himax and other companies' shipments of touch and display driver integration (TDDI) semiconductor solutions for smartphones and making their offer of products for the automotive industry largely insufficient, compared to the demand.
These problems are, however, going to be fixed along the way of the economic recovery. So, the company should start supplying all business segments without leaning too much towards one or some of them. In the short term, this should already give a strong boost to revenues.
In the long term, several driving factors, such as increased working from home and distance learning programs, will help the demand for semiconductors for display drivers greatly, as there will be higher usage of computers, tablets and smartphones.
The demand for automotive electronics and high-end TV products will also rise. That is true especially for the latter, as more and more people are equipping their homes with cutting-edge technologies to watch movies in streaming and to capture video content available on several platforms online.
Additionally, with a total number of nearly 3,530 patents between granted and waiting to be approved, Himax holds an unbelievable potential of technological resources to untap.
Looking Ahead
Total revenues should increase by approximately 15% sequentially, while the gross profit margin should fall in the 50.5% - 52.0% range, according to the guidance from Himax. Furthermore, the adjusted earnings per diluted American Depository Share is expected to be between $0.75 and $0.81, versus a consensus of $0.68.
Wall Street’s Take on Himax Technologies
In the last 3 months, one Wall Street analyst issued a 12-month price target for Himax Technologies. The average analyst Himax Technologies price target is $20, implying a 74.22% upside. The analyst rating consensus is a Moderate Buy rating, based on 1 Buy, zero Hold and zero Sell ratings.
Summary
Himax Technologies has performed very well on the stock market so far this year. Some catalysts are suggesting that the share price should continue to rise.
The company is expected to improve revenues and earnings along the way, as the demand for semiconductors gains strength and the company's supply is distributed further across market segments.
Disclosure: At the time of publication, Alberto Abaterusso did not have a position in any of the securities mentioned in this article.
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