OmniVision (Nasdaq:OVTI) is a good value right now. It has been on a 60+ day run. After the 3rd quarter earnings came out Friday, the stock price close for the day at 17.13 yielding the following highlights:
- p/e ~ 10
- book value ~ 14.31
- p/b value ~ 1.20.
- Z-score ~3.67
- fair value price $39.04, a potential of 127% upwards swing [using 14.8 p/e and 1.5 bv]
In OmniVision's 2nd quarter 10Q filing it was mentioned that prior guidance was revised down when the company's key customers unexpectedly cutback their orders. This action reduced unit sales of the OmniBSI and OmniPixel3-HS based products and adversely affected their revenues for the 2nd quarter of fiscal 2012.
Apple (Nasdaq:AAPL) is suspected of being one of OmniVision's largest customers. They usually try to get two sources for their manufactured parts. For the iPhone-4/iPhone-4S CMOS image sensors they used Sony (NYSE:SNE) and Omnivision. The Apple iPhone-4/iPhone-4S uses the OmniVision's 8-megapixel image sensor based on the new OmniBSI™ technology. There is a rumor that OmniVision lost the deal with Apple on the iPhone-4S . The iPhone-5 is also rumored to be using Sony and Samsung as CMOS image sensors vendors, replacing OmniVision.
In OmniVision's 2nd quarter 10Q filing I found another sentence which stated the following:
"We also experienced a recent and unanticipated extension in the product development cycle of our OV8830 product. This delayed the production ramp up of this new sensor. Towards the end of our second quarter of fiscal 2012, we started to ship this product in very limited quantities."The OmniVision OV8830 CMOS Image Sensor (CIS Technology) is based on their new stacked Back-sided Illumination OmniBSI-2 Technology.
Wait! Extension of product cycle? I'll explain in the Hard Facts section....
Rumors, rumors, rumors
There is a rumor that OmniVision lost the CIS technology deal with Apple on the iPhone-4S. The iPad-3 is coming out in March and there is no OmniVision production ramp-up for that.
[Edit: I could be wrong. - Robert W. Baird & Co, said Apple's iPad could boost OmniVision revenue by 30 percent over the revenue from iPhone last year. ]
The iTV successor may be release soon and could possibly use OmniVision; However, there seems to be no production ramp-up for that either. The iPhone-5, which is to be released later, is a possibility and the new OmniBSI-2 Technology 4mm width would fit into the new slimmer design. However, that is all speculation. But in the short run, where could the decreasing revenues be generated?
This quarter's earnings
Ok, back to last night's 3rd quarter earnings conference call from OmniVision. Everybody was asking or trying to confirm who the large customer that cancelled their orders was. Everybody was trying to confirm if the rumor about Apple was true. I don't think that is the take-away from the call. When asked what division will increase the most in the near future, the answer was the "entertainment business".
Ray Cisneros, VP of Worldwide Sales explained the product mix as follows:
"In terms of product markets, our mobile phone sales represented approximately 52% of our revenues in the third quarter as compared to 60% in our prior quarter. Our entertainment segment represented 28% of sales as compared to 20% in the prior quarter. Our sales of sensors into the notebook and webcam segment were approximately 8% of sales as compared to 9% in our prior quarter."
Hard Facts
OmniVision has signed a deal with Nintendo (NTDOY.PK) on their new Wii successor, Wii U. It is to be released after March 31, 2012.
OmniVision started mass production of the 0V10630/OV10635 based on OmniPixel3-HS technology for the auto industry.
OmniVision is in mass production of the best-in-class 720p HD video performance chip.
OmniVision is in a deal with ASUS Transformer Prime Tablet which uses the OV8830 OmniBSI-2 Technology and is considered the most advanced Tablet out in the market at this time.
OmniVision and Sony signed a deal for a Video Camera using the CameraCubeChip design.
Conclusion
OmniVision seems to have other deals which will lessen the risk of revenue declines if Apple changes its mind. It has a very broad range of products. I haven't even scratched the surface of all their competitive advantages.
I have no stake in OVTI.
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