Virtual reality (VR) technology is increasingly being adopted by the gaming and entertainment industries worldwide. As demand for in-home entertainment climbed last year amid social distancing norms, VR headsets saw high demand. Also, the virtual operations of companies worldwide, coupled with rising demand for virtual events, have driven the VR industry’s growth. Indeed, global VR sales rose 31.7% year-over-year to $1.80 billion in 2020.
This trend is likely to continue because VR is an integral component of the global digital transformation of enterprises. The global virtual reality market is expected to grow at an 18% CAGR over the next seven years.
The current semiconductor shortage has been a significant obstruction to the VR industry’s growth. However, hefty federal investments to bolster chip production coupled with disruptive innovations each day should offset the short-term headwinds. Thus, we think that popular VR stocks Lumentum Holdings Inc. (LITE), Himax Technologies, Inc. (HIMX), and Immersion Corporation (IMMR) could be valuable additions to one’s portfolio.
Lumentum Holdings Inc. (LITE)
LITE in Milpitas, Calif., manufactures optical and photonic products, and operates through two segments: Optical Communications (OpComms) and Commercial Lasers (Lasers). The company has a strong international market presence, with operations across the Americas, Europe, Asia-Pacific, Middle East, and African countries.
LITE’s non-GAAP revenues increased 6.5% year-over-year to $392.10 million in its fiscal fourth quarter, ended July 3. This can be attributed to a 7.5% rise in revenues in its Optical Communications segment. Its non-GAAP gross profit margin improved 50 basis points to 47.7%. And its income from operations came in at $45.80 million, up 69.6% from the same period last year.
LITE has been a joint participant in a technical paper on Mobile Optical Pluggables with industry leaders Nokia and Ericsson. Regarding this, LITE’s Director of Product Line Management, Transmission, Justin Abbott, said, “As high-capacity and cost-effective optical solutions are critical to 5G and next-generation mobile networks, we are excited to participate in defining industry requirements, which will both help the industry advance and increase the market opportunities for our highly differentiated full-band tunable pluggable transceiver platform.”
On May 26, the company partnered with ON Semiconductor to develop two joint reference designs that accelerate AIoT devices. This should improve the accuracy and intelligent decision-making capabilities of next-generation AIoT devices for biometric access control, 3D electron locks, and many more.
A $1.73 billion consensus revenue estimate for its fiscal year 2021 indicates a 3.2% improvement year-over-year. Analysts expect the company’s EPS to rise 14.6% from the same period last year to $6.21 in the current year. In addition, LITE has an impressive earnings surprise history; it topped the consensus EPS estimates in three out of the trailing four quarters. Shares of LITE have gained 5.4% in price over the past month and 7.4% over the past five days to close yesterday’s trading session at $84.96.
LITE has an overall B rating, which equates to Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
The stock has a B grade for Growth and Quality. In addition, it is ranked #13 of 56 stocks in the B-rated Technology – Communication/Networking industry.
Beyond what we’ve stated above, we have rated LITE for Value, Stability, Momentum, and Sentiment. Get all LITE ratings here.
Himax Technologies, Inc. (HIMX)
Based in Taiwan, HIMX develops fabless semiconductor solutions that have applications in display imaging processing technologies. It operates in two segments: Driver IC, and Non-Driver Products. It sells its products in Taiwan, China, the Philippines, Korea, Japan, the United States, and Europe.
For the fiscal third quarter, ended June 30, HIMX’s revenues increased 95.3% year-over-year to $365.26 million. Its non-IFRS operating income came in at $134.03 million, up 8,047.5% from the same period last year. Its net income rose 1,1374.4% from the prior-year quarter to $108.32 million. And its earnings per ADS stood at $0.623, reflecting a 7,687.5% improvement from the year-ago value.
On July 15, HIMX sponsored the tinyML Vision Challenge to boost tinyML computer vision technology development into the developer community. Though the company will not receive direct monetary benefits, this investment should accelerate the development of leading-edge ultralow-power machine learning, which might result in disruptive innovations.
The Street expects HIMX’s revenues to be $1.51 billion in its fiscal year 2021, indicating a 70.3% rise year-over-year. The company’s EPS is expected to rise 800% from the same period last year to $2.70 in the current year. Furthermore, HIMX beat the consensus EPS estimates in each of the trailing four quarters, which is impressive. HIMX has gained 207.9% over the past year and 62.9% year-to-date.
It’s no surprise that HIMX has an overall B rating, which equates to Buy in our proprietary rating system. In addition, it has an A grade for Value, and B for Growth and Momentum. Of the 99 stocks in the B-rated Semiconductor & Wireless Chip industry, HIMX is ranked #41.
In addition to the grades highlighted above, view HIMX ratings for Stability, Sentiment, and Quality here.
Immersion Corporation (IMMR)
IMMR develops haptic technologies for mobile communications, consumer electronics, automotive, gaming, and medical industries. The company sells in international markets across North American, European, and Asian countries. IMMR is headquartered in San Jose, Calif.
IMMR’s total revenues came in at $11 million in its fiscal second quarter, ended June 30, reflecting a 93% rise year-over-year. This can be attributed to a 94.6% rise in royalty and license revenues. Its non-GAAP net income and EPS improved 800% and 666.7%, respectively, from the prior-year quarter to $7.20 million and $0.23.
IMMR signed an agreement with TITAN Haptics to make its licenses available to TITAN’s actuator integrated products on August 13. Regarding this, IMMR’s CEO Chris Ulrich said, “We’re pleased to be partnering with TITAN Haptics to make it easier for mobile phone OEMs, especially those in China, to gain access to our innovative haptic patent portfolio.”
Also this month, the company expanded its license with Stanley Electric Co., Ltd. to use its haptic technologies in the automotive market. With rising applications of touch feedback technology in vehicles, this licensing expansion marks IMMR’s expansion to the global automotive market.
Analysts expect IMMR’s revenues and EPS to rise 44.3% and 40%, respectively, year-over-year to $10.75 million and $0.21 in its fiscal third quarter (ended September 2021). Also, the company surpassed The Street’s EPS estimates in three out of the trailing four quarters. IMMR has gained 10.2% since hitting its 52-week low of $6.10 on October 10, 2020.
IMMR’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to Buy. It has a B grade for Growth, Value, and Quality. In addition, IMMR is ranked #20 of 145 stocks in the Software – Application industry.
Click here to view additional IMMR ratings for Sentiment, Stability, and Momentum.
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LITE shares were trading at $84.17 per share on Friday afternoon, down $0.79 (-0.93%). Year-to-date, LITE has declined -11.21%, versus a 19.36% rise in the benchmark S&P 500 index during the same period.
About the Author: Aditi Ganguly
Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities. More...
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