InvenSense (INVN) is an American company, headquartered in San Jose, California, that designs and manufactures micro-electro-mechanical-systems (MEMS), and sells them to OEMs involved in the manufacture of smartphones, tablets, portable gaming devices and controllers, gaming consoles and smart televisions throughout the world. MEMS provide motion sensing/tracking capabilities to devices and include gyroscopes, accelerometers, compasses, and pressure sensors. The company develops 2-axis, 3-axis, 6-axis and 9-axis motion sensors that are employed in a number of devices in the technology industry.
InvenSense in the market today
InvenSense closed at $17.75 on September 3rd, 2013 after a 0.17% decline in its share price from $18.03 at the day's opening. The stock's price has risen by almost 6% over the past one month, and by a good 31.7% over the past 3 months since it declared its earnings for the first quarter of the current fiscal year. The InvenSense stock is currently trading at 20x its estimated future earnings projected for next year, with a current market capitalization of $1.53 billion. The current stock valuation suggests that the InvenSense stock is overvalued, and that its share price has a good chance of coming down in the future. However, whether this holds true or not for InvenSense would be based on the current position of the company in the market, with its competitors as well as the current and projected events in the industry.
The company has been showing great progress and growth since going public in 2011, and has shown a revenue growth of 50% year-over-year in the first quarter of the new fiscal year. The company has shown positive earnings and has surpassed its revenue guidance of $53-$55 million by generating $55.9 million in revenues in the first quarter of the FY13-14. In addition to that, InvenSense also met its earnings per share guidance by delivering an EPS of $0.12.
The revenues and earnings reported for the first quarter have grown well from the same quarter in the previous year, and the company's guidance for the next quarter shows its confidence in further improvements in its financials. The company boasts a healthy cash position to back its operations.
Opportunities in the market
InvenSense produces multiple axis gyroscopes that are employed in smartphones, tablets, portable gaming devices, gaming consoles, and smart TVs for motion sensing. The company has a great stake in the smartphone and tablet market, and the growth in the smartphone and tablet industry has a simultaneous effect on the sales of the company. The handheld industry has seen enormous growth over the recent past, and is predicted to grow in the future as well.
InvenSense has been rumored to have secured a supply contract with Apple for its upcoming iPhone. The upcoming premium Apple iPhone 5S and a much cheaper budget iPhone 5C could prove to be a boost to the company's existing profile in the market, as well as generate huge revenues for the company. Also, securing a contract with Apple would help it acquire supply contracts with other OEMs in the market too.
Not only is the smartphone industry growing, but there is a simultaneous growth in the handheld gaming device industry. Android and iOS apps for gaming on smartphones and tablets are gaining pace as users that were previously not much into gaming on their handhelds. What is more is that OEMs are producing dedicated gaming tablets that employ advanced graphic cards and gyroscopes for a more real and better gaming experience. Thus the growth in smartphone and tablet industry benefits InvenSense not only in terms of its sales to the mobile market, but it also contributes indirectly to the growing gaming market, which again benefits InvenSense. In addition to that, gaming consoles continue to remain the rage with gamers and thus remain a healthy source of revenues for the company.
Future prospects and stock price
Future prospects for InvenSense look promising as the smartphone and tablet industry as well as the gaming industry is set to grow into the future, and devices keep evolving to bring better experiences to users in terms of gesture responsiveness. The growth of these industries is coupled with the growth of companies that produce the components that make these products a success, and thus it has a direct impact on the growth of suppliers to the companies that make these devices. InvenSense has already seen immense growth since its IPO in 2011, and the market has been favorable ever since. The future seems just as positive for InvenSense seeing the past growth rates for the company as well as its current financials. The company's estimates for future revenues and earnings shows its confidence in the market and the company's capability to cash on the opportunities that the market currently holds.
The company's progress and positive future prospects thus far suggest a rising stock price for InvenSense, despite a high Forward P/E value. A catalyst that could further add up to the stock price in the near future is the launch of the new iPhone 5S which is expected on the September 10th 2013. Long term investors should consider this a good investment based on strong growth prospects while short term investors can play the iPhone launch event.