Why Himax Technologies, Inc. Stock Lost 24.6% in March

MarketsMotley Fool

What happened

Shares of Himax Technologies (NASDAQ: HIMX) lost 24.6% of their value in March, according to data provided by S&P Global Market Intelligence.

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The imaging sensor chip company's shares lost value following unfavorable ratings coverage and the announcement of an acquisition. Himax Technologies is a small cap company with a market capitalization of roughly $1.2 billion and an uncertain business outlook, so its stock is prone to big swings in relation to news and ratings coverage.

So what

Zacks rated the company a "strong sell" on March 7, Instinet downgraded the stock to a "neutral" rating on March 9 and lowered its price target from $10 to $8, and Northland Capital Markets also downgraded the stock to a "hold" rating on March 9 and lowered its price target from $18 to $8. Next, a Roth Capital analyst published a note lowering his rating from "buy" to "neutral" in light of concerns that the market for 3D-sensing technology will grow slower than previously anticipated.

Shares also fell on March 29, following the news that Himax had exercised an option to complete its acquisition of Emza Visual Sense -- a company that designs sensor chips for Internet of Things devices.

Now what

Himax has bounced back from its March slump, with shares up roughly 17% in April so far thanks to some positive ratings coverage. The company has a growth catalyst on the horizon if variants of the facial-recognition technology that was a component of Apple's most recent iPhones become more widely adopted in Android mobile devices.

Recent volatility in the stock is tied to shifting outlooks on that front, and how demand shapes up for these products will likely be the key factor in the company's near-term stock performance. There's not a whole lot of visibility as to how that will play out, so Himax should be approached as a high-risk, high-reward investment. Shares trade at roughly 46 times this years expected earnings.

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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Apple. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.