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Dougherty & Co Sees More Upside for Immersion (IMMR) after Google/Motorola Deal

November 28, 2012 3:33 PM EST Send to a Friend
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Price: $10.81 -0.92%

Rating Summary:
    4 Buy, 2 Hold, 0 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 21 | Down: 10 | New: 7
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Dougherty & Co lifted its price target on Buy-rated Immersion (NASDAQ: IMMR) from $9 to $11 following the settlement and license agreement with Google/Motorola's (NASDAQ: GOOG).

"We view Google/Motorola's decision to license Immersion’s haptics technology (ahead of an early 2013 patent infringement trial) as a seminal moment in Immersion's history," analyst Charlie Anderson comments. "Even though the stock moved up 35% on the news Tuesday, we believe the shares at $6 are significantly discounting the impact of this event."

The firm believes the addition of Motorola royalties and the elimination of legal expenses will allow Immersion to do about $14MM of EBITDA in 2013. However, that gives Immersion no credit for signing additional licensees. Giving examples, the analyst notes: "Immersion’s total mobile royalties could be $45MM in FY13 (vs. our $20MM estimate) if it earned a $0.10 per unit royalty on the 450MM Android smartphones projected by iSuppli in 2013. So with that incremental $25MM (royalties fall right to the bottom line) IMMR could be doing close to $35MM of EBITDA if Google’s Android licensees follow its lead and settle. On that number, IMMR is trading at less than 4x EV/EBITDA."

Dougherty believe that Android OEMs will begin to settle and pay IMMR a royalty for using its basic haptics IP. They anticipate EBITDA estimates trending up over the course of the next year.

For an analyst ratings summary and ratings history on Immersion click here. For more ratings news on Immersion click here.

Shares of Immersion closed at $6.32 yesterday.




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