Breakout Stox

Augmented Reality: The Birth of a $162 Billion Boom



The early bird gets the worm, just as the early investor reaps the rewards.

Stocks like Himax Technologies (HIMX) may not look healthy at the moment -- even with a PEG ratio of 0.55 -- but it’s all about buying before the big news.

What’s most exciting is the company’s involvement in augmented reality, which can blur the line between what’s real and what’s computer-generated by enhancing what we hear, see, feel and even smell. And it could change gaming significantly.

Between virtual realities, which create immersive computer-generated environments, augmented reality can create near-real world reality with graphics, sounds, and even smell. It can literally change human perception of the surrounding space when a digitally augmented human interacts with a data sources, notes Network World. 

Look at Pokemon Go to see how excited folks are for the technology.

“Pokémon Go represents one of those moments when a new technology — in this case, augmented reality -- which fuses digital technology with the physical world — breaks through from a niche toy for early adopters to something much bigger. The idea behind the technology is to overlay digital imagery on a person’s view of the real world, using a smartphone screen or a headset,” notes The New York Times.

Helping a bit, Facebook, Alphabet, Google, Sony, and other big companies are pursuing AR with hardware and software, investing billions of dollars into headsets that help users experience virtual worlds. Microsoft, for example, is already supporting AR growth with its $3,000 HoloLens Development Edition headset, which is expected to become a consumer product in years. A Windows-10 powered $300 headset is due out in 2017, too.

It’s an exciting time to buy related stocks, like HMIX.

Even the CEO has noted that AR is “just the beginning of a long-term growth story” for the company. We have to consider HIMX has been working on AR-related technologies for more than a decade. It already works with 30 customers.

Research firm IDC believes a combined augmented and virtual reality market could grow by more than 180% in the next three years to nearly $162 billion from $5 billion this year. Consider what would happen if HIMX was exposed to just 5% of that market. We can assure you it’d be far from its current market cap of $988.6 million.

Himax looks interesting because of all of that. Sure, in recent months the stock was downgraded by Mizuho Securities, which lowered its price target from $10 to $7.79. When this article was written HIMX closed at $5.48.

However, shortly after, the company posted 52.1% year over year revenue growth thanks in part to its driver and non-driver business segment. In fact, revenues from its non-driver business were $46.8 million, up 9% sequentially. The company is made 21.5% of total revenue from its non-driver business (up from 18.5% year over year), which includes AR in the most recent quarter.


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Sequential growth was led by the Liquid Crystal on Silicon (LCOS) and Wafer Level Optics (WLO) shipments for its AR applications. According to the company, “The performance of LCOS and WLO increased several folds year-over-year thanks to shipments to the Company’s major AR customer. The year-over- year growth was partially offset by the decline of programmable gamma OP, power management IC, and CMOS image sensors.”

“Himax expects, however, the LCOS and WLO shipments to slow down starting fourth quarter 2016. The Company remains positive on the long-term prospect of these two product lines, judging by the numerous customers the Company has engaged, many of which the world’s biggest tech names, and the busy engineering activities going on with such customers.”

We have to also consider that HIMX’s chips for LCOS provide a lot of the vision that many AR and VR developers need, as well. Such displays are as thin as glasses and can help provide great user experience.

That’s growth none of us can afford to ignore.