Update: InvenSense Q1 '15 Earnings

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 |  About: InvenSense (INVN)
by: Stone Fox Capital

Summary

InvenSense reported Q1 '15 earnings.

Guidance confirms original thesis to trust management team on new customers.

The growing market share was anticipated to drive the stock higher.

Despite a mixed quarterly report, InvenSense (NYSE:INVN) continues to trade near all-time highs. The provider of intelligent sensor solutions announced that revenues grew 19% to reach $66.7 million, while earnings declined to $0.08 per share from the prior year period of $0.14. The main culprit for the earnings decline was a substantial increase in operating expenses. More specifically, the company greatly increased research and development expenses to capture market share in the rapidly expanding market for sensors in smartphones, tablets, and now wearables.

The real key to the quarter was the strong guidance for revenue and earnings to jump sequentially in the September quarter. InvenSense forecast revenue growing to $88.5 million, or up roughly 33% sequentially. Earnings are forecast to reach at least $0.15. The earnings number was slightly disappointing with analysts previously forecasting a jump to $0.19. More importantly though, management confirmed the ramp of a North American customer that would equal 10% of sales for the quarter and future quarters. Investors will of course speculate this includes the expected release of the iPhone 6 from Apple (NASDAQ:AAPL). The real key is that it includes several key customers in North America that are expected to contribute to a further jump in revenue in the December quarter.

Back in a previous article, the suggestion was to always trust management on the eventual capture of Apple as a customer. Whether or not the 10% customer is them, InvenSense continues to gain market share in a sector that has a long growth path with the development of wearables. The ability to keep operating expenses relatively flat sequentially from the forecasted September levels should help provide leverage to generate strong earnings. After a year of out spending revenue, InvenSense appears set to reward shareholders for the patience.

Disclosure: The author is long INVN, AAPL. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article. The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities. Before buying or selling any stock you should do your own research and reach your own conclusion or consult a financial advisor. Investing includes risks, including loss of principal.