Immersion Corporation

IMMR Details

Immersion Corporation (NASDAQ: IMMR) specializes in designing, developing, and licensing cutting-edge haptic technologies that enable consumers to have more immersive and realistic digital interactions by engaging their sense of touch. IMMR is a renowned haptics specialist who creates products that please end-users. The company's software is targeted at mobile devices, wearables, consumer electronics, and gaming devices. IMMR has over 1,800 granted or pending patents globally as of March 31, 2021. It generates revenues from royalty and licensing payments and development contract and service fees and operates in Asia, North America, and Europe. As of July 23, 2021, the company’s market capitalization stood at USD 236.89 million.

Q2FY21 Results: As per the preliminary data released on July 06, 2021, IMMR anticipates its Q2FY21 revenues to be around USD 10.50 to USD 11 million, with GAAP operating expenses ranging between USD 5.1 to USD 5.5 million. It also estimates its GAAP net income to be in the range of USD 5.0 to USD 5.5 million, or USD 0.16 - USD 0.18 per share (diluted). However, the preliminary estimates may be subject to change. IMMR stated that it would report the finalized Q2FY21 results on August 16, 2021.

ASUSTek Multi-year License Renewal: IMMR stated on June 17, 2021, that its licensing agreement with ASUS relating to the use of TouchSense software and haptics in ASUS ROG Phones had been extended. The ASUS ROG Phone series provides advanced haptic effects for gaming with this software, boosting customer engagement and experience.

Q1FY21 Results: The company reported a rise of 14.42% in total revenue to USD 7.16 million in Q1FY21 (ended March 31, 2021) compared to USD 6.26 million in Q1FY20. Revenues from royalty and license were USD 7.07 million in Q1FY21 vs. USD 6.18 million in Q1FY20. The company reported an increase in net income to USD 2.04 million in Q1FY21, compared to a net loss of USD 4.83 million in Q1FY20. As of March 31, 2021, the company had cash and cash equivalents of USD 102.62 million with no outstanding debt.

Key Risks: A small number of clients account for a large amount of the company's revenue. Samsung, for example, accounted for a large portion of overall revenues in FY20. This is anticipated to hold true in the foreseeable future, according to IMMR. As a result, the company's operational performance might be harmed if it loses or reduces revenue from significant clients.

Outlook: When it comes to haptics, interest is at an all-time high. As a result, the company anticipates that as more customers get acquainted with sophisticated haptics, the technology will be used more widely in its key markets, leading to its continued development.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company’s FY21E trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

IMMR Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: IMMR share price has declined by 48.48% in the past six months and is currently trading in the lower band of the 52-week range of USD 6.01 to USD 16.64. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is at 34.17. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 8.03. Considering the correction in the stock price in the past six months, strong balance sheet, high profitability, strong awaited Q2 results, and associated risks, we recommend a “Hold” rating on the stock at the closing price of USD 7.50, down 2.22% as of July 23, 2021.

*All forecasted figures and Industry Information have been taken from REFINITIV.

*The reference data in this report has been partly sourced from REFINITIV.