Wednesday, February 23, 2011

Omnivision Tech (NASDAQ:OVTI): Sony could win all of initial iPhone 5 procurement orders - Baird

Baird is out with a potentially significant call on Omnivision Tech (NASDAQ:OVTI) noting their field research points to Omnivision having lost significant share in PCs as well as in China late last year due to its focus on Apple, while its new 8mp sensor may not be ready for the initial iPhone5 launch, suggesting Sony could win all of initial iPhone 5 procurement orders. BSI yields remain sub-par while Omnivision has yet to secure new capacity, in their view. These factors create second-half risks for Omnivision. Baird lowers their target to $24 from $34 while leaving OVTI Neutral rated.

Details:

- We believe Omnivision lost significant market share in PCs as well as in China late last year due to its focus on Apple.
- Beneficiaries include Aptina, Samsung,and SETI.
- We believe Samsung is now sampling CMOS image sensors to Apple for potential
future products.

Our recent field research points to Omnivision’s 8mp BSI sensor potentially not ready by the time the iPhone 5 launches in July.
- We believe there is now a higher likelihood Sony could be the sole CMOS image sensor supplier to the iPhone 5 during its initial ramp.
- We see no delays in the launch of the iPhone 5 so far.

Our field research leads us to believe BSI’s yields remain sub-par .
- BSI is likely not the reason for the recent improvements in Omnivision’s gross margin, in our view.

We believe Omnivision failed to secure additional wafer capacity late last year due to higher wafer prices.
- We believe Omnivision’s ties with both foundry and tier-one customers may be frayed for some time.

Net, Omnivision could face a difficult second-half outlook, in our view.
- Above-mentioned share losses could represent a partial offset to the iPad2 ramp in the April quarter.


Notablecalls: Ouch, this could hurt OVTI. Last time around Baird hinted the iPhone5 sensors could be dual-sourced the stock took a 10% hit intraday.

OVTI is set to report #'s tomorrow after market close & if Baird's tech team is right, they may have to cut their guidance (regardless of CMOS demand).

Looking for $24 level as 1st support.

Kudos goes to Tristan Gerra, Baird's Semiconductor Component Research analyst for his wonderful work on OVTI.

1 comment:

marr3060 said...

Wow, what a quarter out of OVTI. Looks like Baird, Tristan Gerra, was just spreading FUD. These guys beat earnings estimates by 50% and raised 4th quarter estimates 50%. This is the biggest beat and raise out of any semi stock this quarter. Also, OVTI has $500mln in cash and market cap of only $1.3bln. At a very minimum, this stock should be up 10% just to reflect the cash generation (>$100mln) for the quarter. 2012 earnings look close to $3.00 - at 15x this stock is $45 (this includes $10 in cash)!!!

OVTI is riding the Smartphone wave, seeing margins expand and is a major supplier to Apple. This stock is going to run - time to get in!