Needham & Company Downgrades OmniVision Technologies (OVTI) to Hold; Accelerating Competitive Pressure and Gross Margin Risk

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OVTI Hot Sheet

Rating Summary:
5 Buy, 5 Hold, 0 Sell

Rating Trend:

Up

Today's Overall Ratings:
Up: 16 | Down: 7 | New: 23

Needham & Company downgraded OmniVision Technologies (NASDAQ: OVTI) from Strong Buy to Hold.

Needham analyst says, "While OVTI significantly lowered its F2Q12 revenue outlook on 11/7, we believe OVTI faces two long-term challenges: 1) gross margin compression due to increasing pricing pressure and 2) an accelerating competitive landscape in the 8MP non-Apple (Nasdaq: AAPL) smartphone market. Our industry checks indicate that OVTI has lost a considerable share of the non-Apple smartphone market to players such as Samsung, Aptina & Toshiba (all N/R). While OVTI initially had the technological lead in backside illumination (BSI) for over two years, we believe that gap has narrowed significantly due to OVTI’s internal design/production issues (i.e. 8830 sensor) and competitors catching up. The shares are currently trading at 6x (ex-cash) off our reduced FY13 EPS of $1.00."

"We are lowering our FY12 and FY13 estimates to $877.5MM/$1.35 (vs. $1.00BN/$2.10) and $880.0MM/$1.00 (vs. $1.07BN/$2.30), respectively."

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

Shares of OmniVision Technologies closed at $13.14 yesterday, with a 52 week range of $12.60-$37.05.

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