InvenSense (INVN) Upgraded to Overweight at Pacific Crest on Pokemon Go Opportunity
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Pacific Crest upgraded InvenSense (NYSE: INVN) from Sector Weight to Overweight with a price target of $9. Analyst John Vinh sees "significant growth opportunity" from augmented reality (AR) and Pokemon Go. He also said share gains at Samsung and drone opportunity will be tailwinds in the second half of the year.
"We expect the popularity of Pokemon Go and an anticipated rise in AR applications, particularly in China, to create a significant growth opportunity for 6-axis gyros, particularly in midrange smartphones, where the current attach rates are minimal. Without a gyro in a smartphone, users are unable to effectively play Pokemon Go today because of limited navigation capabilities. We see opportunities for InvenSense in gyros and microlocation software in a 500 million unit total addressable market. We estimate every 10% share would add $0.11 to our F2018 EPS estimate," said Vinh.
"We also see incremental tailwinds for INVN in 2H16 related to share gains at Samsung on the Note 7 and a strong holiday ramp associated with drones, where the company's content continues to grow and OEMs are expected to introduce drones at price points down to $199," continued the analyst.
Vinh added, "Risks to our upgrade and target include (1) gross margin risk, as midrange smartphone sales tend to be more price-sensitive, (2) risk that Pokemon Go is not launched in China, where we anticipate significant opportunity for growth, and (3) a disappointing iPhone 7 cycle. Despite risks, we see favorable risk/reward with the stock trading at 1.5x EV/S, well below its median multiple of 3.2x."
Shares of InvenSense closed at $6.80 yesterday.
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