Friday, March 1, 2013

Why OmniVision Shares Sank

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of semiconductor image-sensor company OmniVision Technologies (NASDAQ: OVTI  ) sank 11% today after�the company issued guidance that disappointed Wall Street.

So what: OmniVision's third-quarter results blew out estimates -- EPS of $0.56 on revenue of $423.5 million versus the consensus of $0.40 and $411.4 million -- but downbeat guidance for the current quarter is triggering concerns over slowing growth going forward. While management said that the outlook simply reflects a seasonal trend in its business, the large size of the revenue drop-off suggests that more serious competitive and demand headwinds are at play.

Now what: OmniVision now sees fourth-quarter adjusted EPS of $0.14-$0.29 on revenue of $300 million-$330 million, well below Wall Street's estimates of $0.32 and $371.4 million, respectively. "To be sure, we are not yet where we want to be," said CEO Shaw Hong. "However, we will continue to execute on available opportunities, including continue to streamline our supply chain vendors, better manage logistics and increase design efficiencies to improve gross margins, while meeting our customers' needs." With the stock now off about 40% from its 52-week highs and trading at a forward P/E of 8, betting on that bull talk might be worth considering.

Interested in more info OmniVision? Add it to your watchlist.

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