PXLW EARNINGS BREAKDOWN
Upon looking into the PXLW numbers extensively, as well as listening in on the conference call, I can clearly see why the stock tanked afterhours. It has nothing to do with Q3 and everything to do with Q4 guidance. Here is the breakdown:
- Towards the end of Q3 business started tailing off, which has become somewhat of a theme for all technology companies during this earnings season thus far.
- Overall book to bill for Q3 ended below 1.
- 5% sequential revenue growth, but down year over year.
- Positive product news in that PXLW newest chip is in the new, cutting edge LG 84" ultra-high def display. Ultra-high def will replace the current HDTVs out there. Unlike 3D TV, it won't bomb either. PXLW seems to have a leg up in this segment of the marketplace. Only problem is that significant revenue creation from this trend is still more than a year away in my estimation.
- Q3 margins declined both sequentially and year over year.
- Adj EBITDA was up both sequentially and year over year.
- PXLW generated $1.4 million in cash during the quarter, increasing cash on hand to $15.6 million with zero debt on the balance sheet.
Now for the really rough part:
It seems as though the end of Q3 made management extremely pessimistic. Again, this has been a pretty consistent theme among companies so far. PXLW is certainly not immune.
They forecast Q4 revenues to be in the $13.5-$14.5 million range versus revenue of $16.3 million in Q3. A 14% decline in revenue sequentially. They are also forecasting further margin compression and higher expenses. That leads to a forecast for a loss of between .12-.23 cents per share for Q4, versus a .02 cent per share profit in Q3.
This is a pretty dramatic turn versus Q3 results. I believe it is a short-term blip, as the company does have a history of volatile results from quarter to quarter. It will nevertheless be painful to the stock price over the short-term.
PXLW will likely settle into the 2.30 - 2.50 range for the foreseeable future. Outside of positive macro catalysts changing the global outlook, I believe the company has lost whatever momentum it had gained recently. On the positive side, there is very little downside risk below 2.30. Certainly a long-term value play as well as a play on their leadership position in a cutting edge technology driving the company much higher in 2013-2014. Into the end of 2012, however, PXLW will likely be dead money in the 2 range.
