Omnivision: The Street Is Nervous

OmniVision (OVTI) shares are coming under pressure today ahead of the company’s earnings report for the fiscal first quarter ended July, which is due after the close on Thursday.

The Street is nervous about the numbers. Doug Freedman, an analyst at American Technology Research, today repeated his Neutral rating on the stock, and cautioned that he expects a “miss and lower quarter.”

Freedman asserted in a research note that both the low-end and the high-end of the image sensor market are being squeezed by both competition from Korean vendors and by Micron’s (MU) Aptina unit. “In an intensely competitive commodity business, OVTI must demonstrate the ability to deliver both gross margin improvement and increased revenue, either with more cost effective products or differentiated technology,” he writes.

Friedman expects FY Q1 sales of $163.9 million and profits of 10 cents a share.

J.P. Morgan’s Paul Coster also wrote a cautious note on the company today. He’s looking for sales of $165.6 million and profits of 21 cents a share, which is well below the consensus of $174.7 million and 30 cents.

Coster says the stock does not appear expensive, at 10.8x his pro forma calendar 2009 estimate of $1.06 a share, but he says that consensus estimates are too high, and that an ongoing reset of expectations is likely to weigh on the stock. He maintains a Neutral rating on the shares.

OVTI today at close is down 41 cents, or 3.53%, to $11.21.