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TheStreet Open House

Himax (HIMX) Plunges on Earnings: Is it Still a Buy?

NEW YORK (TheStreet) -- Semiconductor company Himax (HIMX) plunged 9.1% to $8.61 after reporting soft fourth-quarter guidance before the bell.

The Google (GOOG) Glass components-maker said it expects fourth-quarter revenue flat or slightly lower than $192.8 million in the third quarter. Analysts surveyed by Yahoo! Finance expected revenue of $207.98 million. The company said it anticipates earnings between 7.5 cents and 9.5 cents a share, lower than analysts' expectations of 11 cents a share.

The Taiwanese manufacturer attributed the weak guidance to decreasing demand for large-size LCD components which accounts for 30% of revenue. During the third-quarter, sales of these components dropped 25% on the year-ago period, adding to a 19% drop seen in the second quarter.

Offsetting weakness for large-size LCD drivers, Himax reported 15.1% growth in sales of small- to medium-panel drivers, contributing 52.1% to total revenue. Non-driver sales, which include microdisplays provided to Google, grew 30.5% to $34.6 million compared to third quarter 2012.

Though inching 1.3% higher, third-quarter revenue missed estimates by $720,000, as analysts expected $193.52 million. Earnings of 11 cents a share beat estimates by 1 cent.

TheStreet's fundamental analysis expert Bryan Ashenberg had this to say about Himax:

"Trifecta Stocks holding Himax Technologies beat its third-quarter earnings estimate by a penny as earnings came in at $0.11 and revenue rose 1.3% year-over-year to $192.8 million, in line with consensus. The company issued lowered guidance, in line with our earnings preview. Our bottom line is that we are still focused on the LCoS pickup and view near-term volatility as a buying opportunity.

"Management commented on the LCoS business saying they had new design-wins from multiple top-tier customers for new head-mounted display projects. Management refused to comment directly on a specific customer (Google), but commented that they have plenty of capacity to meet customer demands and are ready for the customer's ramp in 2014. Current capacity can produce 200,000 panels a month, and the company expects to be able to ramp to production of 2 million panels a month in a short period of time, as needed by their end customers. Management has purchased additional land around their manufacturing facility so they can expand capacity as needed.

"This stock investment is about what will be, and not what is, and therefore, we reiterate our bullish stance on the name. You can read more about this stock pick and our other picks by taking a 14-day free trial to the service here: Try Trifecta Stocks."

TheStreet Ratings team rates Himax Technologies Inc as a Buy with a ratings score of B. The team has this to say about their recommendation:

"We rate Himax Technologies Inc (HIMX) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity, solid stock price performance and impressive record of earnings per share growth. We feel these strengths outweigh the fact that the company shows weak operating cash flow."

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