Adam Benjamin, an analyst at Jefferies & Co., expects disappointing news when OmniVision (NASDAQ:OVTI) on Thursday reports its financial results for the fiscal third quarter ended January.
Benjamin says the company is being hit by “severe” pricing pressure in VGA image sensors - and a slower than expected shift in the market away from VGA (which produces low resolution images of 480 x 640 pixels) to higher margin megapixel sensors.
Benjamin expects calendar fourth quarter 2006 results to be in line to slightly below his estimate of $140 million, but with gross margins likely below his current estimate of about 30%, due to the slower-than-expected move to higher res sensors and price pressures in VGA. He also thinks that for the calendar first quarter the company will likely guide revenue below his current estimate of $130 million; he says EPS guidance will likely imply gross margin below 30%, versus his current estimate of 31% for the same reasons.
Benjamin does not think the stock has hit bottom, noting that “with a likely negative earnings revision, we believe there will be a better entry point.”
OmniVision yesterday was down 60 cents at $13.01.
OVTI 1-yr chart