Immersion Corporation

IMMR Details

Immersion Corporation (NASDAQ: IMMR) is a leading licensing business specializing in creating, developing, and licensing breakthrough haptic technologies that allow customers to have more immersive and realistic digital experiences by using their sense of touch. Mobile devices, wearables, consumer electronics, and gaming devices are all the application targets for the company's software. As of June 30, 2021, IMMR had more than 1,700 issued or pending patents worldwide. It operates in Asia, North America, and Europe and earns money via royalties, license payments, development contracts, and service fees. As of October 08, 2021, the company's market capitalization stood at USD 220.12 million.

Strategic Agreements: On August 12, 2021, IMMR signed a service contract with TITAN Haptics, a Canadian developer of advanced haptic motors for smartphones, consoles, and touchscreen devices, to make IMMR's haptic patent licenses available to mobile phones and wearables.

Further, IMMR also announced on August 11, 2021, that it expanded its haptics license with Stanley Electric Co., Ltd., a prominent worldwide provider of lighting goods and electronic components, for usage in the automobile sector.

H1FY21 Results: The company reported a sharp surge of 52.36% in total revenues to USD 18.17 million during H1FY21 (ended June 30, 2021) compared to USD 11.93 million during H1FY20, driven by an increase in both per-unit royalty and license revenues. As a result, its net income increased to USD 7.38 million during H1FY21 compared to a loss of USD 5.54 million reported in H1FY20. As of June 30, 2021, its cash and cash equivalents were USD 107.27 million, with no outstanding debt.

Key Risks: A small number of clients generate a significant portion of the company's revenue. In FY20, for example, Samsung accounted for a sizable share of total revenues. According to IMMR, this is expected to continue in the near future. As a result, if the firm loses or lowers income from crucial clients, its operational performance may suffer in the future.

Integrated circuit manufacturers have failed to meet the present surge in demand, despite the government's easing restrictions on facility operations. It's because of the influence of the COVID-19 pandemic on consumer behavior. In addition, the number of royalties payable to the company may be decreased if the supply of particular electronic components is disrupted for a prolonged period, resulting in a worsening of its financial state of affairs.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's NTM 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 44.27% in the past nine months and is currently leaning towards the lower band of the 52-week range of USD 6.10 to USD 16.64. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is at 43.58. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 8.45. Considering the correction in the stock price in the past nine months, strong balance sheet, robust profitability margins, strategic contracts, and associated risks, we recommend a "Speculative Buy" rating on the stock at the closing price of USD 6.81, up 1.79% as of October 08, 2021.

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

* All forecasted figures and industry information have been taken from REFINITIV.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.