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Midday Wrap: Apple Talk Shifts From Headphones to Displays:

Stocks in this article: AAPL PXLW

NEW YORK (TheStreet) -- Apple  (AAPL) dominated the StockTwits' streams Friday. But the talk went beyond the headlines concerning Apple's potential buy of headphone maker Beats Electronics. By midday investors had shifted focus to how an Apple partnership was working out for Pixelworks (PXLW).

$PXLW Is not fading finally. Revenue shows that Apple is for real here and with them buying competitors this year - just an added bonus. ? Nosh (@Nosh) May. 9 at 12:37 PM

The video display chip designer was among the top trending companies on by early afternoon. It reported a lower first quarter loss than expected Thursday evening on higher-than-anticipated revenues. Shares climbed nearly 10% by midday.

The company is small with just a $121 million market cap. But it has big clients. Sales to Apple and NEC make up more than 10% of its revenue each. Sales to Hitachi, Panasonic and Epson also each made up more than 10% of sales, according to an SEC filing.

More importantly, it boasts technology that promises to bring the video quality of large screen televisions to mobile devices. On the earnings conference call, CEO Bruce Walicek said the company would launch the technology in "sampling devices" this quarter. "This will be the industries first video display processor that brings the video quality of large screens to mobile screens," Walicek said.

Crisp mobile displays are considered particularly important for Apple, which has driven demand for high resolution screens on portable devices with the "Retina display" on its iPads.

$PXLW don't know how it's trading at this low of a price...should be valued higher ? Dre1012 (@Dre1012) May. 9 at 10:18 AM

Some investors argue that Apple will want the highest resolution screen possible for its next generation mobile devices -- fueling demand for Pixelworks' products. And, if all the iPhone-like Droid phones out there are any indication, the mobile industry quickly takes Apple's lead.

$PXLW market cap is too low for what's going on here. ? _flipper_ (@_flipper_) May. 9 at 12:25 PM

Sentiment on Pixelworks is 95% bullish, according to StockTwits' analytics. The bullishness was only increased by some of the financials revealed Thursday night. Pixelworks' margins expanded in the first quarter to 59% from 48.1% in the same quarter a year ago. They were up sequentially as well. Revenues grew 64%, year-over-year, to $13.5 million--though they were down from the fourth quarter, a fact management attributed to seasonality of orders.

Despite the bullishness, there is some concern that management is not ramping up production fast enough to prove outsized demand or that Pixelworks' can redefine display technology. But many investors still believe that the company will increase production in the second half of the year, as promised.

@Dre1012 Once the topline shows evidence of the 'ramping up of production' they keep talking about, we'll see some more interest. ? Robert Jeffery (@TSOGR) May. 9 at 10:22 AM

At the time of publication the author held no positions in any of the stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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