The Stock Set to Benefit Most from Wearable Technology

NEW YORK (TheStreet) -- Even before Google Glass' consumer launch, Google (GOOG) has become a name associated with wearable technology.  However, the tech giant could face new competition from an industry veteran: Microsoft (MSFT).

Citing unnamed sources familiar with the matter, The Wall Street Journal reports the company is testing Google Glass-like prototypes. Microsoft eyewear would mark the newest entrant into the wearable technology market following Google and Samsung's Galaxy Gear smartwatch.

The reason to join the race is clear: technology research firm Gartner says analysts predict wearable technology to emerge as a $10 billion industry by 2016, the most successful of which will offer fitness tracking or communications functionality.

The winner among the warfare could be Himax (HIMX), a liquid crystal on silicon (LCoS) microdisplay supplier which produces components vital to the manufacture of technology-enabled accessories. The Taiwan-based company is currently the major supplier of microdisplay technology to Google.

As Microsoft allegedly commissions component makers in Asia components for eyewear prototypes, Himax has begun to increase production to satisfy the demand of an undisclosed firm in addition to its Google contract. Investment firm Chardan Capital speculates the company in question could be Microsoft, after analyst Jay Srivatsa met with the supplier in September.

At the time of publishing, a Microsoft spokesperson had not commented on reports.

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

"Himax is an exciting play on what is sure to become the market's next technological infatuation, wearable computers. We have heard rumors for months now that the next generation Xbox may come equipped with two wearable displays per console. Himax believes it controls greater than 75% of the LCoS market share, making it the likely supplier to Microsoft.That is why we have the stock as a pick within our Trifecta Stocks portfolio which only contains stocks we consider to be the best of the best. At Trifecta Stocks we strive to find only the top 1% of all the stocks available on the U.S. stock exchanges and have deemed Himax one of those. 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."

Himax shares closed 2.9% lower to $9.93, Microsoft dropped 2.4% to $33.76 and Google gained 2.4% to $1,031.41. The S&P 500 finished lower by 0.47% to close at 1,746.38.

TheStreet Ratings team rates Himax Technologies Inc as a Buy with a ratings score of B. TheStreet Ratings 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."

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

  • The revenue growth came in higher than the industry average of 8.2%. Since the same quarter one year prior, revenues slightly increased by 9.2%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • HIMX's debt-to-equity ratio is very low at 0.17 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.41, which illustrates the ability to avoid short-term cash problems.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Semiconductors & Semiconductor Equipment industry and the overall market, Himax Technologies Inc's return on equity exceeds that of both the industry average and the S&P 500.
  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 416.83% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, although almost any stock can fall in a broad market decline, HIMX should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • Himax Technologies Inc has improved earnings per share by 22.2% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, Himax Technologies Inc increased its bottom line by earning 30 cents a share vs. 6 cents a share in the prior year. This year, the market expects an improvement in earnings (38 cents vs. 30 cents).


TheStreet Ratings team rates Microsoft Corp as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:

"We rate Microsoft Corp (MSFT) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. 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, attractive valuation levels and increase in stock price during the past year. We feel these strengths outweigh the fact that the company shows weak operating cash flow."

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

  • MSFT's revenue growth has slightly outpaced the industry average of 5.7%. Since the same quarter one year prior, revenues rose by 10.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • MSFT's debt-to-equity ratio is very low at 0.20 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 2.53, which clearly demonstrates the ability to cover short-term cash needs.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Software industry and the overall market, Microsoft Corp's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.


TheStreet Ratings team rates Google Inc as a Buy with a ratings score of B+. TheStreet Ratings Team has this to say about their recommendation:

"We rate Google Inc (GOOG) a BUY. This is driven by a few notable 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 increase in stock price during the past year, growth in earnings per share, compelling growth in net income, revenue growth and largely solid financial position with reasonable debt levels by most measures. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results."

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

  • Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • Google Inc has improved earnings per share by 34.4% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, Google Inc increased its bottom line by earning $32.47 a share vs. $29.74 a share in the prior year. This year, the market expects an improvement in earnings ($43.53 vs. $32.47).
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Internet Software & Services industry average. The net income increased by 36.5% when compared to the same quarter one year prior, rising from $2,176 million to $2,970 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 12%. Since the same quarter one year prior, revenues rose by 11.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • GOOG's debt-to-equity ratio is very low at 0.06 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 4.50, which clearly demonstrates the ability to cover short-term cash needs.

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