Himax Stock is Charging on All Cylinders

Taiwan-based chipmaker Himax Technologies NASDAQ: HIMX stock peaked out again in July 2021 ahead of its Q2 2021 earnings release which produced the highest top and bottom lines in its history. Shares of Himax continue to fall despite blowout earnings and upside guidance. The fabless display imaging processor chipmaker is running on all cylinders fueled by the recovery in automotive, smart televisions, displays, internet of things (IoT) , sensors and tablets. Its Q3 2021 guidance is almost twice the consensus analyst estimates, yet shares are still falling. The post-pandemic reopening is a powerful tailwind that should continue to propel shares higher once the market realizes the Company is becoming a bargain on the slide. The Company said that demand is outpacing supplies and should continue well into 2022 due to the global chip shortage. This is providing an opportunity for prudent investors to accumulate shares on opportunistic pullbacks.  

Q2 FY 2021 Earnings Release

On Aug 5, 2021, Himax released its fiscal second-quarter 2021 results for the quarter ending June 2021. The Company reported an earnings-per-share (EPS) profit of $0.64 excluding non-recurring items versus consensus analyst estimates for a profit of $0.46, an $0.18 beat. Revenues grew 95.3% year-over-year (YoY) to $365.3 million beating analyst estimates for $362.05 million. Himax beat its own raised guidance of $0.54 to $0.60 range. Revenues, gross margin, and EPS reached all-time highs in Q2 2021. Himax CEO John Wu commented, “The semiconductor industry continues to go through a severe foundry shortage, especially in the mature process nodes where we are mainly anchored. With foundries running at more than full capacity while demand shows no indication of abating, the long-lasting unaddressed supply-demand imbalance remains. In view of the foundry shortage and anticipated growing demand for the foreseeable future, we have entered into strategic agreements with foundry partners to cover both our short-term and long-term needs. We are in the process of entering into further such agreements as we speak, with some of them involving new foundry partners, leaving nothing untried to expand our capacity pool. Likewise, across various product lines, we are entering into strategic agreements with customers who wish to secure their IC supplies. Some of them are indirect customers who don’t necessarily source ICs directly from us but still wish to enter into supply deals with us to ensure that their direct vendors, mostly panel makers in our case, will get their desired supply quantities from us. All such contractual arrangements will help boost our future growth prospects and improve earnings visibility. “Notwithstanding all these efforts, demand continues to outpace supply and we believe the imbalance could last well into 2022.”

Raised Q2 2021 Guidance

Himax raised its Q3 fiscal 2021 guidance with EPS coming in between $0.75 to $0.81 nearly doubling the  $0.41 consensus analyst estimates. The Company sees sequential revenue growth of 13% to 17%, equating to revenues coming in between $412.8 million to $427.4 million versus $365.9 million consensus analyst estimates. Gross margins are expected in the range of 50.5% to 52%.

Conference Call Takeaways

CEO Wu set the tone, “For the third quarter, large display driver IC revenue is projected to increase more than 30% sequentially with all the three major product lines set for further growth. In Q3, we expect both monitor and notebook businesses to post double-digit growth, benefiting from remote work and online schooling trends. For TV segment, we expect over 20% sequential growth in Q3 anchored by higher-end and larger-sized TVs, despite the slight dip in worldwide TV shipments anticipated for the second half. While demand remains resilient for us, supply still falls well short of demand fulfillment. As consumers spend more time indoors and the number of connected devices per household is rising steadily, we are seeing more demand for advanced displays, such as higher resolution TV, higher refresh rate monitor, and ultra-large-sized, high-aspect-ratio curved-view displays. We continue to lead the high-end TV and gaming monitor markets by offering major panel makers and end customers total solutions of our driver ICs and advanced Tcons together. In addition, we are also working on next-generation notebook DDICs, shooting for high-end and low power consumption features to enhance our product portfolio and market share gains.” Small and medium-sized display driver IC is expected to grow 70% YoY in Q3 2021 thanks to the demand in automotive and tablet segments, but smartphone segment is expected to decline single-digit percentages. Himax commands over 30% of the global market for automotive drivers.

WiseEye Total Solution

CEO Wu also detailed its WiseEye total solution, “Our WiseEye total solution implements ultralow-power computer vision AI that aims at endpoint devices with constraints in processor resource and power consumption. In addition to the design-win for a mainstream application from a leading tech name that we reported last quarter, we are pleased to report new awards during the second quarter from utility meter, battery camera and panoramic video conferencing applications. Some of these applications are expected to enter into mass production beginning the fourth quarter of 2021.” He continued, “We continue to work on various new solutions covering a wide variety of applications including door bell, surveillance, smart city, healthcare, agriculture and many other AIoT devices, with joint efforts from multiple algorithm partners in different domains, including Himax subsidiary Emza. We are at the forefront of delivering cutting-edge ultralow power smart image sensing solutions to the edge AI markets.”

HIMX Opportunistic Pullback Levels

Using the rifle charts on the weekly and daily time frames provides a precision view of the price action playing field for HIMX shares. The weekly rifle chart is breaking down with a falling 5-period moving average (MA) at $13.27 about the cross the 15-period MA down at the $13.48 Fibonacci (fib) level. The weekly market structure high (MSH) sell triggers on a breakdown under $11.58. The weekly stochastic has a mini inverse pup with lower Bollinger Bands (BBs) at $10.24. The daily rifle chart is in a downtrend with a falling 5-period MA at $12.42 as the stochastic falls under the 20-band. The daily market structure high (MSH) sell triggered on a breakdown under $14.48 as it also collapsed through the daily market structure low (MSL) buy trigger at $13.48. Prudent investors can monitor for opportunistic pullback levels at the $11.79 fib, $11.37, $11.79 fib, $10.60 fib, $9.88 fib, and the $9.40 fib. The upside trajectories range from the $13.48 fib up towards the $17.91 fib level.