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This doesn’t happen as often as it did even a few years ago (because it’s done automatically in the background now), but do you remember when you would get an alert on your computer that you needed to “Update Drivers”? Did you ever wonder exactly what a driver was and why they always seemed to need updating?Let’s dive into that in our under $10 stock this week, with Himax Technologies (HIMX). Himax is what is known as a fabless semiconductor developer that focuses on digital imaging technology. They are a smaller player in the overall imaging drivers market with about 8% of the market share. So, what are these imaging drivers? You can think of them as language interpreters, just like the ones you see when world leaders meet, or a foreign athlete who doesn’t speak English is interviewed on TV. The drivers are interpreters between the computer operating system and the graphics hardware. Every piece of graphics hardware speaks a foreign language when it comes to your computer’s operating system, and the drivers are there to tell the graphics hardware what to display given the commands coming from your computer’s operating system. Himax makes the driver software that lets things like your laptop, cellphone, and even car display be able to work and show you the appropriate picture or video. The company is seeing growing demand, especially in the automotive market where it is a larger player, as new displays are added in even lower end automobiles. In its latest earnings report, Himax beat expectations for both revenue and earnings. As Jordan Wu, President and CEO stated, “[O]our longer-term outlook for the automotive business, our largest revenue contributor, remains positive, as we maintain a dominant position in the sector. The majority of our design-wins…both relatively new technologies for [the] automotive sector, are slated to commence mass production during the next two years, thereby further fortifying our market share leadership amidst growing competition.” The stock was recently upgraded to outperform by Credit Suisse with an $8 price target. That is well above its current price of just under $6, but also just back to where the stock was trading in the early part of this year. Himax trades at just 1.7x its cash holdings, and currently pays a 4.4% dividend, which is a good sign of stability for a semiconductor company. Semiconductors are very cyclical, and that dividend provides a nice base for any downturn.Not surprisingly, Himax has its highest component rating in our POWR Ratings in the Value area, where it has an A rating. It also has a B rating in the Momentum component. At these prices, Himax definitely deserves a look, especially if, as the market is expecting, we’re at the tail end of the rate cycle and about to see a resurgence in smaller stocks as rates move lower. More By This Author:POWR Stock of the Week Under $10: PHX Minerals
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