By Steve Symington | More Articles | Save For Later
May 3, 2013 | Comments (0)

Shares of motion sensor specialist InvenSense (NYSE: INVN   rose by as much as 27% Friday after the company reported its fiscal fourth quarter 2013 earnings.

So what has everybody so excited?

For the quarter, net revenue jumped 67% year-over-year to $55.2 million, exceeding even the company's own guidance which called for revenue between $52 million and $54 million. For the 2013 fiscal year, net revenue came in at $208.6 million, up more than 36% from $153 million in 2012.

Even better, net income for the fourth quarter rose a whopping 130% from the year-ago period to $13.6 million, or $0.15 per diluted share. Those results served to prop up the company's full-year net income, which grew 40% to $51.7 million, or $0.59 per diluted share.

Finally, InvenSense ended fiscal 2013 with $200.3 million in cash and equivalents, up 3.8% sequentially and 27% from the end of fiscal year 2012.

Source: InvenSense.

What's next?
Perhaps unsurprisingly, smartphone and tablet growth once again paved the way for InvenSense's success. However, that growth was even more pronounced this quarter, with smartphones and tablets comprising around 80% of the company's total sales, up from 67% last quarter. 

What's more, the company certainly isn't resting on its laurels; it announced a few new innovations in conjunction with its earnings release.

The first two came in the form of the "world's smallest dual-axis gyroscopes for optical image stabilization in smartphones." Just like they sound, the IDG-2030 and IXZ-2030 devices were created with the aim to "eliminate the effects of hand jitter to achieve blur-free images and jitter-free HD video," and will be sampled to select customers sometime during InvenSense's fiscal third quarter. The IDG-2030, for its part, measures just 2.3 x 2.3 x 0.65 millimeters, providing a 41% footprint reduction, 28% lower profile, and uses 50% less power than the nearest competing solution.

Of course, these are the kinds of technologies consumers generally take for granted as they use their mobile devices, but anyone who's ever taken a picture or video with their smartphone knows how tough it can be to simply hold still long enough to get the darned thing to focus. So when the images or video from your next device seem a whole lot more stable, there's a good chance you'll have InvenSense to thank.

Finally, InvenSense also announced the MPU-6521, the "world's smallest, lowest profile, and lowest power 6-axis" motion tracking device. While this one boasts obvious applications in smartphones, the company also hopes it can find a place in next-generation tablets, gaming devices, motion-based remote controls, and wearable sensors.

What now?
I can't say I'm particularly surprised by the pop. After all, just three weeks ago I urged investors to buy shares of InvenSense before they rebounded.

As it stands, however, today's jump only just brings InvenSense into positive territory so far in 2013, and the stock is still down more than 30% from its levels this time last year. Even better, when you factor in the latest numbers, InvenSense now trades hands for just 18.4 times last year's earnings. If you back out that $200 million in cash (or more than 21% of the company's total market cap), that trailing P/E falls to a mouth-watering 14.5.

Considering analysts' hefty long-term growth estimates north of 20%, I'd say shares of this small cap still look like a screaming buy.

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ADNC, INVN, ONNN: Street Reviews the Apple-Samsung Supply Chain

By Tiernan Ray

The Street today is playing another version of handicapping the suppliers to Apple (AAPL) and Samsung Electronics (005930KS) and the rest of mobile market, names such as Audience (ADNC), On Semiconductor (ONNN) and InvenSense (INVN).

Invensense, which makes micro-electromechanical systems (MEMS) that support sensor capabilities in smartphones and tablets, last night reported fiscal Q4 revenue and profit per share that slightly exceeded consensus estimates. The shares in response are up $2.45, or 26%, at $11.76.

Shares of Audience, which makes chips that refine the quality of audio communications in handsets, are down $2.13, or almost 14%, at $13.50, despite reporting Q1 revenue and profit per share that beat and offering a better-than-expected forecast.

Somewhere in the middle, stock-wise, is ON Semi, which makes a variety of circuitry for a myriad of functions, from “clock generation” to analog-to-digital converters, to power management.

Last night it reported Q1 revenue slightly below expectations but beat on the bottom line by a couple pennies, and forecast this quarter’s revenue a bit light. Its shares are up modestly today, rising 18 cents, or 2.4%, at $8.09.

Wedge Partners’s Brian Blair, reflecting on InvenSense, writes that “InvenSense remains on a tremendous trajectory this calendar year, and though we would have liked to have seen a stronger revenue guide for June, we were encouraged by all of the company’s commentary around Samsung, gross margin expansion, new customers (Apple?), China, and the expanding market for InvenSense’s solutions.”

“We believe investors were bracing for a revenue miss for March and very weak guidance for June (given Samsung concerns), and we expect the company’s solid report and positive market share and sector commentary to silence the naysayers.”

Piper Jaffray’s Gus Richard, who has an Overweight rating on Invensense, and considers it his “best long idea,” today reiterates his $27 price target, writing that the only weakness in the report was 50% gross margin, lower than the 52% he was modeling, which was “due to customer product transitions and slower than expected uptake of new, higher margin products.”

But, “As these new products ramp, gross margins will return to the mid 50 percent range,” writes Richard. He examines the importance of the balance sheet:

Cash and investments were up $7.8M to $200.3M for cash per share of $2.28. Accounts receivable rose $5.6M to $30.1M, and DSOs increased 12 days to 50 days. Inventory was $23.8M, up $5M (up 26% QoQ), and days of inventory increased by 16 days back to 62 days. We believe the spike in inventory is anticipation of stronger orders ahead and we view it as a positive.

John Pitzer with Credit Suisse, who has a Neutral rating on Audience shares, raised his price target on the stock to $16 from $14, after raising his estimates for this year and next, writing that this year is all about the transition away from reliance on Apple to greater reliance on Samsung:

A q/q decline in C2Q revenue was anticipated, but is being more than offset by significantly higher GM (up 380bps q/q; 480bps for product GM) as June contains a significantly higher mix of eS325 to support the GS4 ramp at Samsung. Higher GM will be offset somewhat by higher tape out costs but net/net EPS goes up. For the full year, we still see 2013 as a transition away from AAPL – especially AAPL was/will be 33%/26%/21% of C4Q/C1Q/C2Q sales – we see AAPL at sub-10% exiting 2013 – risk will be timing and linearity of the decline as AAPL introduces iphone5s and potentially a low end phone replacing the waterfall of 3GS, 4 and 4S. However, we continue to see good growth prospects outside of AAPL and still expect 30% revenue growth in 2013, and 14% in 2014.

James Faucette with Pacific Crest reiterates a Sector Perform rating on Audience stock, writing that he’d like to see more “diversification and faster growth from customers outside of Samsung and Apple.” Nevertheless, his estimates are going up today, modeling $180 million in revenue and 67 cents EPS this year versus the $170 million and 39 cents he had been modeling previously:

On one hand, we were encouraged by the company’s commentary about design wins and particularly its commentary around improving traction into mid-tier smartphones. We believe handset makers may be increasingly open to deploying a high-end audio processing solution into mid-tier smartphones […] On the other hand, the company’s former largest customer, Apple, was only 26% of revenue in Q1 on its way to below 10% by 4Q13. Audience is beginning to get gross-margin benefit from the ramp of its third- generation processor as we move through 2013; however, we believe may be somewhat of a challenge for this business to more than offset the highly profitable business from Apple that Audience is losing.

Canaccord Genuity’s Bobby Burleson reiterates a Buy rating on ON Semi shares, and a $10 price target, advising that despite a soft outlook for revenue, “Our positive leverage thesis on a cyclical recovery remains intact, supported by ONNN’s design wins in automotive, wireless and consumer white goods, combined with share gain in computing.”

“As revenue recovers, gross margins should improve, especially for the Sanyo division, enabling the company to approach target gross margins laid out during ONNN’s analyst day in February.”

Likewise, Chris Danely of J.P. Morgan reiterates an Overweight rating on shares of ON Semi, and a $10 target as well, writing that the outlook for $675 million to $715 million was actually higher than his $690 million estimate, even though it missed consensus of $702 million.

Writes Danely, “ON stated bookings improved throughout the March quarter and lead times have extended from seven weeks to nine weeks.”

“As we state in Rule #3 of our top ten rules of semiconductor investing, ‘lead times going out is good.’ Backlog represents 80%-85% of 2Q13 guidance, roughly flat from 1Q13.”

Danely sees the company delivering much higher margins as it restructures its Sanyo Semiconductor unit:

The main reason we are Overweight ON Semi is we believe it has significant leverage and earnings power. We estimate ON has roughly 56% EPS upside in C14, the highest in our semiconductor universe, and we believe the Sanyo Semi unit could drive $1.16 in peak earnings. Target margins of mid teens – would be $1.16 of EPS… Current operating margins are 5.7% and EPS is $0.05 per quarter. We believe if ON executes on the restructuring and the industry experiences an upturn, operating margins can get to its target of 18.0%, which translates to roughly $1.16 in annual EPS […] We believe ON Semi can achieve quarterly EPS of $0.29 based off total revenue of $800.0 million, gross margins of 41.0%, and operating margins of 18.0%. The latter model equates to roughly $1.16 in annual EPS.

• Wednesday, May 15, 12:13 PM ET
  InvenSense (INVN +4.6%) will gain Apple as a client this year and will also be designed into Samsung's Galaxy Note 3, says Pac Crest in a note that's lifting shares. On Monday, Wedge Partners, which in the past has said checks point to an iPhone 5S design win, said initial Apple shipments could happen in Q2, and that InvenSense is part of a reference design for MediaTek's 6589 quad-core processor, something that has led to a design win with growing Chinese smartphone vendor Xiaomi. Also: InvenSense filed a fresh lawsuit against archrival STMicroelectronics (STM +1.7%) yesterday.

Decent run today almost to $15, here is the reason:

10:56 AM Apple is ramping as an InvenSense (INVN +5.4%) customer and the Sep. quarter will be an inflection point for sales, says Piper in a note giving a lift to the motion sensor maker's shares. Pac Crest, Wedge Partners, and most recently Goldman have already reported of an iPhone 5S design win for InvenSense; Goldman added it thinks InvenSense "holds a cost advantage and a clearer roadmap for advanced products," than archrival and historical Apple supplier STMicroelectronics (STM), and also raised the possibility of iPad and low-cost iPhone design wins. Read comments

And yesterday (Jun 13) there was of course this:

Thursday, June 13, 1:47 PM An InvenSense (INVN +2.4%) motion sensor, a Synaptics (SYNA +0.8%) touch controller, Elpida (MU +2.1%) mobile DRAM, and 16GB of SanDisk (SNDK +0.1%) NAND flash were found during a Google Glass teardown. A Texas Instruments (TXN) app processor was also found, but given TI's planned exit from the mobile processor space, Google will likely go elsewhere for future models. Over the near-term, Glass volumes should amount to a small fraction of those seen for high-volume smartphones, but that could change if prices come down and privacy concerns are addressed.

Another one of our top-picks (DSNY, IOC, NQ are the other ones) just has received an analist boost from Oppenheimer:

RESEARCH ALERT-InvenSense: Oppenheimer raises target price

    July 16 (Reuters) - InvenSense Inc <INVN.N>: 

 * Oppenheimer raises target price to $19 from $15; rating outperform 

 

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INVN Q1 2014 @ http://www.earningsimpact.com/Transcript/82497/INVN/InvenSense%2c-Inc----Q1-2014-Earnings-Call