Why Shares of Immersion Corp. Slumped Today

By Timothy Green Markets Fool.com

What happened

Continue Reading Below

Shares of touch feedback technology developer Immersion Corp. (NASDAQ: IMMR) tumbled on Friday after the company fell well short of analyst estimates when it reported its fourth-quarter results. Immersion also provided disappointing guidance for 2017. At 11:30 a.m. EST, the stock was down about 18.5%.

So what

Immersion reported fourth-quarter revenue of $9.3 million, down 44% year over year and more than $1 million below the average analyst estimate. Non-GAAP EPS came in at a loss of $0.27, down from a profit of $0.07 in the prior-year period and $0.09 lower than analysts expected. On a GAAP basis, Immersion posted a net loss of $38.1 million, reflecting a non-cash charge related to the company's deferred tax assets.

Image source: Immersion Corp.

Immersion expects to generate between $38 million and $42 million of revenue in 2017, down from $57.1 million in 2016. Excluding recognition of wind-down rights from Samsung, which added $19 million of revenue in 2016, revenue will be flat to up 11%. Non-GAAP EPS is expected to be a loss of between $0.76 and $1.05 for the full year.

Continue Reading Below

Now what

CEO Vic Viegas tried to explain the company's weak guidance: "In the near-term, we recognize that there will be some trade-offs with regards to financial performance as we vigorously defend our IP. In addition to normal considerations, our guidance for 2017 takes into account the ongoing litigation with Apple and the current unlicensed status of Samsung."

Despite these issues, Viegas sees a bright future for Immersion, saying, "Looking ahead, we are confident that our innovative solutions and IP increasingly will be recognized as a 'must have' by existing and new customers, leading to measurable value creation and growth prospects in 2017 and beyond."

With Immersion calling for a steep revenue decline and big losses in 2017, it should be no surprise that investors are selling off the stock.

10 stocks we like better than Immersion
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Immersion wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of February 6, 2017

Timothy Green has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Apple. The Motley Fool has the following options: long January 2018 $90 calls on Apple and short January 2018 $95 calls on Apple. The Motley Fool has a disclosure policy.