Immersion Stock is a Turnaround Play

Haptic technology products provider Immersion NASDAQ: IMMR stock appears to have fallen under-the-radar even as they raised their guidance. Haptic technologies involve touch-based sensors to engage in experiences and applications. These can range from mobile communication products like smartphones and tablets to gaming peripherals and consoles to automobiles. Immersion technology is incorporated in over three billion devices worldwide. The pandemic bolstered demand for its products which are a cornerstone of the digital world and the reopening should see a recovery and rebound automotive and continued strength in mobile and gaming. Prudent investors looking for exposure in a haptic technology play can watch Immersion for opportunistic pullback levels to scale into a position.

Q1 FY 2021 Earnings Release

On May 6, 2021, Immersion released its fiscal first-quarter 2021 results for the quarter ending March 2021. The Company reported  non-GAAP earnings-per-share (EPS) profit of $0.07, compared to a loss of (-$0.16) in the year-ago same period. GAAP operating expenses fell (-57%) YoY to $4.6 million from $10.8 million in Q1 2020. Total revenues rose to $7.2 million from $6.3 million in Q1 2020 comprised of $7.1 million on royalty and license revenues. As of March 31, 2021, the Company had cash and cash equivalents of $102.6 million. Immersion interim CEO Jared Smith stated, “The positive financial results that we report today is the result of our team’s progress in transforming the business, despite the uncertain environment of COVID 19. With a continued disciplined focus on optimizing operating expenses and growing our revenues, Immersion is on a positive trajectory toward improved profitability and cash flow generation. Interest in haptics is at an all-time high. We expect that as more consumers experience advanced haptics, we’ll see greater adoption of our technology in our core markets, resulting in continued growth for the company.” The Company added more brands as clients including Cadillac Celestiq and BMW iX and continued YoY revenue growth in its three core markets including automotive, gaming, and mobile.

Conference Call Takeaways

CEO Smith set the tone on the automotive recovery, “In automotive, we see continued market adoption of our technology to improve usability and safety. We are well positioned for strong double-digit percent revenue growth in fiscal 2021. Our growth outlook is based on three factors: First, as highlighted in previous calls, we have seen a gradual market recovery from COVID, and based on recent forecast data from IHS, we believe light vehicle shipments will recover to pre-COVID levels by 2022. We also expect stable growth of vehicle shipments in the years ahead. Second, we see growing adoption relevance of haptics in new vehicle designs.” He went on to note the positive feedback received on its touchscreen hardware unit in its product development kit that being evaluated by a number of Tier 1 automakers. It’s technology is also used in the Sony PlayStation 5 NYSE: SNE DualSense controllers which is has noted that 7.8 million consoles have been shipped since its launch. Supply chain disruptions are still causing shortages. The haptic controllers are so sensitive they can emulate the rumbling of raindrops in a videogame to the delight of gamers. Mobile is expanding quickly in China and its technology will be embedded in the Samsung OTCMARKETS: SSNLF Galaxy 21 launch later this year. He concluded, “ Last quarter, we had numerous patents issued for new inventions relevant to gaming, mobile, automotive, and use of haptics in content distribution and playback standards.”

Upside Guidance Raise

On July 6, 2021, Immersion raised its Q2 2021 EPS guidance in the range of $0.22 to $0.23 versus $0.12 consensus analyst estimates. Immersion sees Q2 2021 revenues to come in between $10.5 million to $11 million versus $8.05 million analyst estimates. The Company stated, “We finished the first half of 2021 with strong momentum in our business, delivering sequential year-over-year growth while continuing to innovate.” Shares spiked up to the $8.94 before selling back down towards the opportunistic pullback levels.

IMMR Opportunistic Pullback Levels

Using the rifle charts on the weekly and daily time frames provides a broader view of the playing field for IMMR shares. The weekly rifle chart illustrates the spike that caused shares to short-squeeze to a peak at $16.64  Fibonacci (fib) level before selling off and forming a weekly market structure high (MSH) trigger under $9.85. The weekly 5-period MA is overlapped with the 15-period MA at $8.51 as the weekly stochastic continues to rise. This sets up a make or break that should resolve. The weekly Bollinger Bands (BBs) are still in contraction mode which precedes a breakout or breakdown. The weekly  market structure low (MSL) buy triggers above $8.10. The daily rifle chart has been in a downtrend with a falling 5-period MA at $8.35 but is stalling as the daily stochastic attempts to cross up. The daily lower BBs are at $7.96 and appear to be contracting as well with the weekly. Prudent investors can monitor for opportunistic pullback levels at the $8.12 fib, $7.66 fib, $7.27 fib, $6.96 fib, and the $6.35 fib. The upside trajectories range from the $10.26 fib up towards the $13.58 fib level.