InvenSense, Inc. INVN, a leading provider of motion tracking devices, is expected to report third- quarter fiscal 2017 results on Jan 25. Last quarter, the company posted a negative earnings surprise of 60%.
Over the last one year, the stock has outperformed the Zacks Electronics - Miscellaneous Components industry. It has gained 59.32% compared to the industry’s gain of 29.69%.
Let’s see how things are shaping up for this announcement.
Factors to Consider
InvenSense reported a sequentially strong fiscal second quarter with revenues increasing 32%. Revenues however declined 29% year over year. Management issued a weak fiscal third-quarter guidance, which indicates continued poor demand in the mobile market.
For fiscal third quarter, InvenSense expects total revenue in a range of $77–$83 million, representing a sequential increase of just 1% at the midpoint. On a non-GAAP basis, gross margin is likely to be 45.5%–46.5%.
Non-GAAP income per share is projected in a range of breakeven to 3 cents, while GAAP loss per share is expected in a range of 12 cents to 15 cents.
The high end smartphone market is likely to remain saturated. Thus, InvenSense has turned its focus on sensor-based solutions for image stabilization, navigation and Augmented Reality (AR). The company is also diversifying into the broader industrial and automotive sensor market.
With technological advancements, demand for console and portable video gaming devices, digital still and video cameras, drones, wearables, AR and VR head mounts and navigation devices is growing. InvenSense’s chips target all these categories and hence should experience demand growth, in our opinion.
However, increasing competition and uncertain demand patterns remain headwinds.
Earnings Whispers
Our proven model does not conclusively show that InvenSense will beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.
Zacks ESP: Both the Most Accurate estimate and the Zacks Consensus Estimate stand at a loss of 8 cents. Hence, the difference is 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: InvenSense’s Zacks Rank #3 when combined with a 0.00% ESP makes surprise prediction difficult.
We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.