Immersion Corporation

IMMR Details

Immersion Corporation (NASDAQ: IMMR) is a leading developer of haptics and touch feedback technologies. The company invents, accelerates, and scales haptic experiences by providing mobile, automotive, gaming, and consumer electronics solutions. The software's target applications are mobile phones, wearables, consumer electronics, and gaming devices. IMMR derives its revenue from royalties, license payments, development contracts, and service fees in Asia, North America, and Europe.

9MFY21 Results:

• Significant Growth in Topline: IMMR reported YoY growth of 29.82% in revenues to USD 25.34 million in 9MFY21 (ended September 30, 2021) compared to USD 19.52 million in 9MFY20, driven by growth in revenue across all categories.
• Surge in Bottomline: Its net income increased to USD 11.15 million during 9MFY21, up from a loss of USD 2.69 million during 9MFY20.
• Strong Balance Sheet: The company's cash and cash equivalents were USD 118.63 million as of September 30, 2021, with no outstanding debt.

Key Risks:

• Customer Concentration Risk: IMMR generates most of its revenue from a limited number of customers, with Samsung alone accounting for significant net revenues in Q3FY21. As a result, the loss of any of its key customers could hurt its financials.
• Input Risk: Shortages of electronic components such as integrated circuits (as it was during the COVID-19 pandemic) necessary for the manufacture of its products may result in lower production and sales of products, thus impacting the overall royalties payable to the company. 

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.

Stock Recommendation:

IMMR's share price has fallen 46.97% in the past three months and is currently leaning towards the lower-band of the 52-week range of USD 4.69 to USD 16.64. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 6.20.

Considering the significant correction in the stock price in the past three months, debt-free company, robust financial performance, strong operating and net margins, current valuation, and associated risks, we recommend a "Speculative Buy" rating on the stock at the closing price of USD 5.08, down 3.42% as of February 02, 2022.

Three-Year Technical Price Chart (as on February 02, 2022). Source: REFINITIV, Analysis by Kalkine Group

Technical Analysis Summary:

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

Note 1: The reference data in this report has been partly sourced from REFINITIV.  

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.