InvenSense (INVN) is set to report FQ3 2014 earnings after the market closes on Wednesday, January 29. InvenSense is a technology company which specializes in motion detecting chips for smartphones, game controllers, toys, and wearable mobile devices. Many analysts are speculating that 2014 may be the year that wearables finally become mainstream. Just as timepieces and pocket watches evolved to wristwatches as soon as the technology could be adequately protected from environmental exposure, we could see what we now know as smartphone technology evolve to external gadgets that can be accessed seamlessly.
InvenSense currently makes about 36% of its revenue from its business partnership with Samsung (OTC:SSNLF), which produces both high end mobile-phones and smart-watches. If wearables take off this year-- whether it be in the form of smart-glasses, wristwatches, or an unforeseen new gadget-- InvenSense could be primely positioned to reap the benefits.
The information below is derived from data submitted to the Estimize.com platform by a set of Buy Side and Independent analyst contributors.
The current Wall Street consensus expectation is for InvenSense to report 12c EPS and $66.64M revenue while the current Estimize.com consensus from 28 Buy Side and Independent contributing analysts is 16c EPS and $69.21M revenue. This quarter the Estimize.com community is expecting InvenSense to beat the Wall Street consensus on profit and revenue by a wide margin.
The magnitude of the difference between the Wall Street and Estimize consensus numbers often identifies opportunities to take advantage of expectations that may not have been priced into the market. In this case we are seeing a large difference between the Estimize.com and Wall Street consensus.
Over the previous 5 quarters the Estimize.com consensus has been more accurate than Wall Street in predicting INVN's profit and revenue 3 and 4 times respectively. By tapping into a wider range of contributors including hedge-fund analysts, asset managers, independent research shops, students, and non professional investors, Estimize has created a data set that is up to 69.5% more accurate than Wall Street, but more importantly it does a better job of representing the market's actual expectations. It has been confirmed by an independent academic study from Rice University that stock prices tend to react with a more strongly associated degree to the expectation benchmark from Estimize than from the Wall Street consensus.
If InvenSense fails to meet the Estimize consensus Wednesday, we could see the stock price stall as the company has not kept up with Buy-Side expectations that may have already been baked into the stock price.
The distribution of estimates published by analysts on Estimize range from 13c to 23c EPS and $66.75M to $80.00M in revenues. This quarter we're seeing a massive distribution of estimates compared to previous quarters.
The size of the distribution of estimates relative to previous quarters often signals whether or not the market is confident that it has priced in the expected earnings already. In this case, the large range of estimates is signaling that analysts disagree about how well InvenSense will perform this quarter. Disagreement between analysts may mean that the expected earnings cannot be accurately priced in to the stock before the report, so we could see a lot of volatility in the stock price after the earnings release.
This quarter we saw significant downward analyst estimate revisions on the Estimize platform right around the end of the quarter. The Wall Street profit consensus declined from 23c to 12c while the profit forecast from Estimize.com slipped from 18c to 16c. The Wall Street revenue consensus dropped from $77.99M to $66.64M. The Estimize revenue consensus plunged from $72.27M to $69.21M at the end of the report. Timeliness is correlated with accuracy, a rapid decline in the community consensus going into the report is often a bearish indicator.
The analyst with the highest estimate confidence rating this quarter is danvk who projects 17c EPS and $71.0M in revenue. In the Winter 2014 season, danvk is currently ranked as the best analyst and is ranked 96th overall among over 3,500 contributing analysts. Estimate confidence ratings are calculated through algorithms developed by deep quantitative research which looks at correlations between analyst track records and tendencies as they relate to future accuracy. In this case the highest rated analyst is expecting InvenSense to beat both Wall Street and Estimize on EPS and revenue.
Analysts on the Estimize.com platform are expecting InvenSense to breakout with strong earnings this quarter. Analyst estimates on INVN are very divided going into the report as evidenced by the wide range of estimates submitted to the Estimize platform. Expect volatility post earnings but the stock may stall if InvenSense fails to live up to the lofty expectations from the buy side on Wednesday.
Disclosure: No positions