OmniVision: Strong Outlook Presents Long-Term Investors With A Good Entry Point

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Shares of OmniVision Technologies, Inc. (NASDAQ:OVTI), the designer and developer of semiconductor image-sensor devices, rose more than 9% in after-hours trading on Thursday. The company reported its first quarter results of its fiscal 2013, after the market close.

First Quarter Results

OmniVision reported first quarter revenues of $258.1 million, down 6.5% on the year. Revenues were up 18.1% compared to the fourth quarter.

Non-GAAP earnings per share fell from $0.76 last year to $0.21 this year. Earnings missed analysts consensus by a penny.

The company reported GAAP net income of $2.3 million, or $0.04 per share. This compares to last year's earnings of $0.68 per share, and fourth quarter earnings of $0.05 per share.

CEO Shaw Hong commented on the results:

"For the third consecutive quarter, we reported revenues that exceeded the high-end of our guidance, and we anticipate another sequential increase in our second-quarter revenues. While we are successful in rebuilding revenues momentum, our gross margins remain under pressure as a result of our current cost structure."


For the current second quarter, OmniVision expects revenues between $355 million and $390 million. GAAP net income is expected to come in between $0.06 and $0.22 per diluted share. Non-GAAP earnings per share are expected to come in between $0.21 and $0.37 per share.

The company did not release a guidance for the full year of its fiscal 2013. Analysts expect OmniVision to earn $1.22 for the current year.


OmniVision ended the first quarter with $236 million in cash, equivalents and short term investments. The company operates with $41 million in short- and long-term debt, for a net cash position of roughly $195 million.

For the full year of its fiscal 2012, the company generated revenues of $898 million. It net earned $66 million, or $1.13 per diluted share. Factoring in a 9% increase in after hours trading, the market values the firm around $930 million, or $730 million for the operating assets. This values the firm at roughly 0.8 times annual revenues and 11 times annual earnings.

Currently, OmniVision pays no dividend.

Investment Thesis

Year to date, shares of OmniVision have risen almost 40%. Shares quickly advanced from $12 in January to highs of $21 in April. Shares fell back to $12 by July of the year, but recovered to $17 at the moment.

Over the past five years, shares of OmniVision have fallen some 20%. Shares fell to lows of $5 in 2008, to rise to almost $35 in 2011. From that point in time shares have lost half of their value. The company grew its annual revenues from $507 million in 2009 to $897 million in 2012. The company improved its profitability from a loss of $37 million in 2008, to turn a profit of $66 million in 2012.

Shares of OmniVision trade with decent gains in after hours on the back of the strong second quarter outlook. The strong second quarter guidance of $355-$390 million, compares to last year's revenues of $218 million. Historically, shares trade at a fair valuation. The company has a strong balance sheet, and rosy short term outlook.

Investors could initiate a long position, but should expect some volatility in the meantime.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.