COVID-19 pandemic restrictions highlighted the importance of augmented reality (AR) because the restrictions compelled most businesses and schools to operate remotely. AR is believed to be the next big thing in the remote connectivity area because it digitally enhances the real time user environment and offers solutions to some of the many communication and networking challenges created by pandemic conditions.

The Increasing penetration of smartphones and other advanced gadgets, and rising investments in cloud-based services, are among the major factors that should drive the growth of the AR market. According to Data Bridge Market Research report, the AR market is expected to grow at a 45% CAGR between 2021 – 2028

Given this backdrop, we think it could be wise to bet on the shares of Lumentum Holdings Inc. (LITE) and Himax Technologies, Inc. (HIMX). They are well positioned to benefit from the rising adoption of AR.

Lumentum Holdings Inc. (LITE)

LITE manufactures and sells optical and photonic products. It operates in two segments, optical communications (OpComms) and commercial lasers (Lasers). The company offers tunable transponders, transceivers, direct-diode and gas lasers and serves customers in markets and applications such as sheet metal processing, general manufacturing, biotechnology and remote sensing.

LITE has collaborated with Ambarella, Inc. (AMBA) and ON Semiconductor (ON) on AI processing-based 3D sensing for next-gen AIoT devices. This new joint reference design offers an industry-first approach for biometric access control, 3D electronic locks and intelligent sensing across verticals. This could lead to increasing demand for LITE’s products.

LITE’s net revenue increased 4.1% year-over-year to $419.5 million for the first quarter, ended April 3. Its income from operations grew 528% year-over-year to $266.9 million, while its net income increased 419.6% year-over-year to $225.5 million. The company’s EPS increased 408.9% year-over-year to $2.85.

Analysts expect LITE’s EPS to increase 14.6% year-over-year to $6.21 for 2021. It surpassed consensus EPS estimates in three of the trailing four quarters. The company’s revenue is expected to increase 3.8% year-over-year to $382.02 million for the current quarter, ending June 30, 2021. The stock has gained 4.7% over the past year to close yesterday’s trading session at $80.69.

LITE’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

It has a B grade for Growth, Value and Quality. We have also graded LITE for Sentiment, Momentum and Stability. Click here to access all LITE’s ratings. LITE is ranked #17 of 55 stocks in B-rated Technology – Communication/Networking industry.

Himax Technologies, Inc. (HIMX)

Headquartered in Tainan City, Taiwan, HIMX is a fabless semiconductor company that provides display imaging processing technologies. It operates through two product segments, driver IC and non-driver. The company offers display driver integrated circuits (ICs) and timing controllers that are used in televisions, laptops, monitors, and mobile phones. It also designs and provides controllers for touch sensor displays.

On May 19, HIMX unveiled its phase modulation liquid crystal on silicon (LCoS) technology for two key application platforms, namely AR Head-Up Display (AR HUD) and Wavelength Selective Switch (WSS). This could lead to increasing sales for the company.

HIMX’s net revenue increased 67.4% year-over-year to $309 million for the first quarter ended March 31. Its income from operations grew 1724.8% year-over-year to $84.8 million, while its profit for the period increased 2259.2% year-over-year to $66.29 million. The company’s EPS increased 1915.8% year-over-year to $0.38.

For the current quarter, ending June 30,  analysts expect HIMX’s EPS and revenue to increase 4,500% and 81.4%, respectively, year-over-year to $0.46 and $324.7 million. It surpassed the Street’s EPS estimates in each of the trailing four quarters. The stock rallied 276.8% over the past year to close yesterday’s trading session at $12.85.

HIMX’s POWR Ratings reflect this promising outlook. The company has an overall B rating, which translates to Buy in our proprietary ratings system. The stock has an A grade for Growth and Value, and a B grade for Sentiment.

Within the B-rated Semiconductor & Wireless Chip industry, HIMX is ranked #14 of 98 stocks. To see all the POWR Ratings for HIMX (Stability, Momentum and Quality), click here.

Click here to checkout our Semiconductor Industry Report for 2021

LITE shares were trading at $81.87 per share on Friday afternoon, up $1.18 (+1.46%). Year-to-date, LITE has declined -13.64%, versus a 13.42% rise in the benchmark S&P 500 index during the same period.

About the Author: Nimesh Jaiswal

Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles. More...

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