By Martin Blanc
Pixelworks, Inc. (NASDAQ:PXLW) advanced as much as 17% yesterday, just after a report was published by Seeking Alpha author, 3D Analytics, claiming that the graphics chipmaker had partnered with Apple Inc. (NASDAQ:AAPL) to develop the upcoming Apple TV, which will be unveiled in the coming months.
3D Analytics disclosed that it is long on Pixelworks, and provided a compelling case for the company's prospects. The company, which designs and manufactures advanced graphics processing chips and software for a range of displays used in smartphones, tablets and televisions, said in a recent filing that Apple is in fact one of its largest customers, and accounted for close to 14% of its revenues in the latest quarter.
Further signs that give weight to the claim include Pixelworks CEO Bruce Walicek's statement that his company was working on a significantly large project to develop a high-tech display, and 3D Analytics is convinced that that project is the Apple TV.
While all of this is speculative as of now, 3D Analytics believes Pixelworks' revenues could also come from supplying its latest Iris graphics chips for the iPhone 6 or the new iteration of the iPad.
Pixelworks could be setting up a long-term strategic relationship with Apple, and that could result in more big-name partnerships going forward. To further solidify its claims, 3D Analytics pointed toward the hefty year-on-year rise in Pixelworks' revenues in the latest quarter, which grew 64% from the same quarter last year.
It is notable that short interest in Pixelworks stock is considerably high at around 13% of the float. The bold claims could have very well resulted in short sellers covering their position, resulting in the spike in price due to a short squeeze. Almost 9.73 million shares of Pixelworks were traded Wednesday, up from the average of around 732,000 in the last 30 days.
The Seeking Alpha author further said the claims meant shares of Pixelworks are highly undervalued, given the major catalyst from Apple, which could significantly boost revenues and profits. 3D Analytics believes that the shares could triple in the month ahead, when more news on the partnership with Apple becomes apparent, and has a $22 price target on the stock.
Shares of Pixelworks rose 14.8% Wednesday to close at $8.73. The stock is up 91% this year.
Disclosure: No positions.