If You Don't Get Motion Sickness, Look Into Buying InvenSense

May. 4.12 | About: InvenSense (INVN)

Last November's IPO, InvenSense (NYSE:INVN), had lived a charmed life during the roughly six months since its IPO. The stock started trading around $9 and eventually traded as high as $22 in March. For an IPO mostly missing the initial day hype, the after market results were spectacular.

On Friday, InvenSense got a rude awakening to the realities of the public market. After reporting solid Q412 results, the company provided slightly lower revenue guidance for Q113. This led the stock to plunge 23% on Friday. The stock went from trading over $18 on Thursday to sub $13 on Friday.

In what has been an earnings season of massive selloffs, InvenSense wasn't even the largest sell-off on Friday. Body Central (OTCPK:BODY) saw a 48% decline; previously Riverbed Technology (NASDAQ:RVBD) saw a nearly 30% loss on similar warnings (see my article on the plunge of Riverbed Technology). In light of the size of these other sell-offs, maybe the fact that InvenSense was only down 23% can be seen as constructive.

InvenSense is the leading provider of MotionTracking(NYSE:TM) solutions for consumer electronic devices in the world. The company`s patented Nasiri-Fabrication platform and patent-pending MotionFusion technology address the emerging needs of many mass-market consumer applications such as, improved performance, accuracy, and intuitive motion and gesture based interfaces. InvenSense technology can be found in consumer electronic markets including smartphones, tablets, gaming devices, optical image stabilization, and remote controls for Smart TVs.

Basically the company is a leading provider for motion sensing technology in tablets and smartphones with specific success on Android based phones. Unfortunately, temporary shortages of Qualcomm's (NASDAQ:QCOM) 8960 chip is leading to a lower-than-expected ramp of new 4G LTE smartphones.

Now the question is whether this huge drop provides a buying opportunity in a leading provider of smartphone enabling technology, or is this just the start of problems?

Considering Qualcomm has already confirmed the problem with the chip, it is difficult to see the issue as anything other than what the company stated. Besides quarterly results were only lowered by $2M on the low end. The company even left open the slim possibility to hit the high end.

This provides an interesting point to enter the stock once it settles down. The end market is growing and not being tied to the iPhone is actually very appealing.

Q412 Earnings Report Highlights

  • Fourth Quarter of Fiscal 2012 Net Revenues: $33.1 Million
  • Fourth Quarter of Fiscal 2012 Net Income: $5.9 Million
  • Fourth Quarter of Fiscal 2012 Earnings Per Share (GAAP): $0.07
  • Fiscal Year 2012 Net Revenues: $153.0 Million
  • Fiscal year 2012 Net Income: $36.9 Million
  • Cash flow from operating activities during fiscal year 2012 was
  • $44.4 million, up 462 percent compared with cash flow from operating activities of $7.9 million during the prior fiscal year. InvenSense ended the fiscal year with $157.8 million in cash and cash equivalents and short-term investments.

Q113 Guidance

Company now expects $38 million to $40 million in revenue for the first quarter of fiscal 2013, down from its previous forecast of $38 million to $42 million.

"A number of our key customers were caught off guard by temporary component shortages associated with a new model of 4G LTE smartphone," CEO Steven Nasiri said on a conference call with analysts on Thursday.


The market isn't very forgiving of weak guidance this earnings season, but investors can now use that to their advantages. The stock price will be volatile for a while until the company proves itself, so investors must be nimble. Similar stocks have taken a week to reach bottom so investors should be very cautious for that time period at the least.

Disclosure: I am long RVBD.

Additional disclosure: Please consult your financial advisor before making any investment decisions.