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Why Pixelworks (PXLW) Is Spiking Today

NEW YORK (TheStreet) -- Pixelworks (PXLW) was spiking 42.7% to $6.85 Thursday after the company detailed its relationship to Apple (AAPL) in an SEC filing.

In a regulatory filing the display maker disclosed that sales to Apple made up more than 10% of its revenue in 2013.

"Recent advancements in display manufacturing technology have allowed display manufacturers to pack an increasing number of pixels into tighter spaces," the filing says. "This transition was led by the mobile segment, and in particular by Apple's "Retina" display, which set the standard for smaller screens. The resolution on display devices in all segments is increasing. This trend of providing more pixels is likely to continue as display manufacturers and device manufacturers seek differentiation, and as content is created at increasingly higher resolutions."

It is not clear what Apple products use or will use Pixelworks products.

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TheStreet Ratings team rates PIXELWORKS INC as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:

"We rate PIXELWORKS INC (PXLW) a SELL. This is driven by a few notable weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. Among the areas we feel are negative, one of the most important has been an overall disappointing return on equity."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Semiconductors & Semiconductor Equipment industry and the overall market, PIXELWORKS INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • PIXELWORKS INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, PIXELWORKS INC reported poor results of -$0.48 versus -$0.31 in the prior year. This year, the market expects an improvement in earnings ($0.08 versus -$0.48).
  • The gross profit margin for PIXELWORKS INC is rather high; currently it is at 64.44%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -0.33% is in-line with the industry average.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Semiconductors & Semiconductor Equipment industry. The net income increased by 98.6% when compared to the same quarter one year prior, rising from -$3.56 million to -$0.05 million.
  • This stock has increased by 103.13% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the future course of this stock, we feel that the risks involved in investing in PXLW do not compensate for any future upside potential, despite the fact that it has seen nice gains over the past 12 months.
  • You can view the full analysis from the report here: PXLW Ratings Report

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