Will InvenSense Inc (INVN) Investment Pay Off?

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InvenSense Inc (NYSE:INVN), a leader in motion processing and motion processing technologies for consumer electronics, recently reported fiscal Q4 earnings that missed Street expectations. The company, known for its motion sensor technology in smartphones, reported Q4 results last Friday, revealing a 6.9% increase in revenue to $59 million. And while this translates to 7 cents per share, analysts were expecting at least 10 cents per share.

Before the numbers were released, InvenSense Inc (NYSE:INVN) dropped more than 12% on Friday, but then recovered to a 6% dip by the end of the day following the Q4 report. To calm some concerns, CEO Behrooz Abdi stated that the company plans to see a greater rate of growth in the second half of 2014, after investing in research and development. Abdi said that these investments in R&D “is now enabling us to make sizable market share gains in our core mobile market and to open up exciting business opportunities in emerging applications, such as wearable.”

Shares of InvenSense Inc (NYSE:INVN) opened at $18.09 on Friday, May 2. The company has a 1-year high of $24.34 and a 1-year low of $11.09 and the stock has a 50-day moving average of $21.92. The market cap for InvenSense is $1.72 billion and its P/E ratio is 69.63.

After learning about InvenSense’s first-quarter numbers, many analysts were encouraged by the company’s potential, recommending BUY or HOLD InvenSense.

Topeka Capital analyst Sujeeva De Silva reiterated his BUY rating on InvenSense Inc (NYSE:INVN), but adjusted his price target from $25.00 to $22.00. Sujeeva argued, “NVN reported March quarter revenue above consensus and guided June quarter slightly behind consensus, but still representing nearly double digit QoQ growth at the mid-point. EPS was slightly behind consensus reflecting higher expenses. We continue to model healthy double digit FY15 revenue growth with ramp at the Company’s lead customer and increasing share in the China handset market.” Sujeeva is ranked 226 out of 3052 analysts, with a +3.2% over S&P 500 (INDEXSP:.INX) and a 53% success rate of recommendations.

Fellow top analyst, Mark McKechnie of Evercore, also recommended BUY InvenSense Inc (NYSE:INVN). His ranked number 22 out of 3052 analysts, with a +9.1% average return over S&P-500 and a 64% success rate of recommendations.

Analyst John Vihn of Pacific Crest reiterated his BUY rating as well, arguing, “Despite a disappointing outlook due to weak order trends at Samsung (47% of revenues in FQ4 vs. 35% of revenues in FQ1), we remain confident that InvenSense Inc (NYSE:INVN) is on track to ultimately penetrate Apple this year.” John Vihn is ranked 2952 out of 3052 analysts, with a -4.7% average return over S&P-500 and a 38% success rate of recommendations.

R. W. Baird analyst, Tristan Gerra, reiterated his BUY rating and noted, “We believe InvenSense is better positioned than last year at a new tier-one smartphone.” Tristan is ranked 2147 out of 3052 analysts, with a -1.0% average return over S&P-500 and a 46% success rate of recommendations.

Arguing along the lines of potential opportunity, Roth Capital Partners analyst Krishna Shankar reiterated his BUY rating. Krishna said, “We are positive on opportunities for market share gains within Samsung and the fast-growing China Android ecosystem, potential Apple opportunities, and design wins for its motion processing platforms, software, and new audio/microphone platform in wearable computing, display, and health/fitness applications.” Krishna is ranked 2366 out of 3052 analysts, with a -2.3% average return over S&P 500 (INDEXSP:.INX) and a 39% success rate of recommendations.

In addition, Goldman Sachs analyst Mark Delaney recommended BUY InvenSense Inc (NYSE:INVN) despite the stock’s decline. Mark stated, “We maintain Buy as we believe the fact that InvenSense built inventory for multiple large ramps, raised opex to support new customer qualifications and guided FY15 sales above the Street indicates meaningful growth potential.” Mark is ranked 757 out of 3052 analysts, with a +3.2% average return over S&P-500 and a 44% success rate of recommendations.

And Vernon Essi of Needham raised his rating from HOLD to BUY, arguing, “InvenSense Inc (NYSE:INVN)’s revenue guidance shortfall along with a material build in inventory seems to have triggered investor anxiety against previously optimistic consensus projections. We were comfortably below consensus and believe this is an opportunity to buy INVN on the cheap.” Vernon is ranked 2895 out of 3052 analysts, with a -2.6% average return over the S&P-500.

On the other hand, Morgan Stanley analyst Joseph Moore, reiterated his HOLD rating on InvenSense Inc (NYSE:INVN). Joseph noted, “March margins and June revenue guidance were surprisingly soft, but we are optimistic that C2Q will be the low point. EPS the last few qtrs has been underwhelming, and the large inventory build is disconcerting. Still, we are optimistic about long term growth optionality, and look for the right entry point.” Joseph is ranked 567 out of 3052 analysts, with a +1.8% average return over S&P 500 (INDEXSP:.INX) and a 59% success rate of recommendations.

And, analyst Cody Acree of Ascendiant Capital Markets also reiterated his HOLD rating after carefully analyzing the numbers. Cody argued, “Although we are maintaining our Hold rating for now, we’re going to carefully consider the size of the near-term pull back, as we believe the cause of much of the earnings disappointment is related to a calculated management decision to significantly increase spending that is at least partially related to support of new customer ramps.” Cody is ranked 2520 out of 3052 analysts, with a -2.6% average return over S&P-500 and a 35% success rate of recommendations.

InvenSense Inc (NYSE:INVN) currently has an analyst consensus of MODERATE BUY.

Jordan Faigen covers financial markets and the latest stock market news. She can be reached at [email protected]

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