Lake Street Feels Confident In Himax Growth Opportunities

Following investor meetings Lake Street Capital Markets hosted with Himax Technologies, Inc. (ADR) HIMX management, the firm said it came away increasingly confident in the growth opportunities the company has in the core driver business and non-driver segment, particularly in the 3D sensing market.

As such, the firm raised its rating on the shares of Himax from Hold to Buy and also increased its price target from $8.50 to $13.

At the time of writing, shares of Himax were rallying 2.28 percent to $10.31.

Game Changing 3D Sensing Opportunity

Analyst Jaeson Schmidt believes the 3D sensing opportunity could be a game changer for the company. The analyst made note of the collaboration the company has with QUALCOMM, Inc. QCOM on a turn-key 3D depth sensing solution. The solution would be up for mass production in the first quarter of 2018, the analyst added.

Following Apple Inc. AAPL's adoption of 3D sensing in its latest iPhone X model, Lake Street expects other Android OEMs to follow suit. Against this backdrop, the firm believes Himax is positioned to be the go-to supplier in the near-term (see Schmidt's track record here).

Additionally, the firm said the ASP and gross margin profile of Himax' product is significantly higher than corporate's average. Lake Street believes momentum will continue beyond Himax' third quarter, as it sees tailwinds from share gains, the share gains by Chinese panel makers and inventory replenishment in the Chinese smartphone market.

Equally Vibrant Non-Core Business

Meanwhile, the firm also sees opportunity in other non-driver businesses such as TDDI and LCOS. The firm indicated that the products in this segment have margins above corporate average.

3D Sensing Real Opportunity This Time Around

This time around, the firm thinks 3D sensing has a better chance to materialize to the P&L, unlike the previous disappointments with Alphabet Inc GOOGL GOOG's Google Glass and Microsoft Corporation MSFT Hololens.

"The 3D sensing solution is targeted for an already established market (smartphone versus smart glasses), and Apple has already incorporated this feature into their latest gen model," the firm added.

Consequently, the firm raised its estimates for 2017 and 2018.