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small-cap

One Small-Cap Tech Play to Bet on - IMMR

May 26, 2021 | Team Kalkine
One Small-Cap Tech Play to Bet on - IMMR

Immersion Corporation

IMMR Details

Immersion Corporation (NASDAQ: IMMR) is focused on the creation, design, development, and licensing of innovative haptic technologies, which create immersive and realistic experiences that enhance digital interactions by engaging users' sense of touch. The company provides advanced tactile software, related tools, and technical assistance for mobile, automotive, gaming, and consumer electronics, and also offers licenses to its patented technology to other customers. As of May 25, 2021, the company’s market capitalization stood at USD 249.86 million.

IMMR Joins Rightware’s Kanzi Partner Program: On May 20, 2021, the company announced a collaboration with Rightware, which develops automotive user interface (UI) software for the design and development of a signature UI in the digital cockpit. The collaboration would enable car manufacturers to use Rightware’s Kanzi Studio with IMMR's Application Programming Interface (API) to test and experience the haptic-enabled Human-Machine Interface (HMI) unit as they create their Kanzi-powered UIs for automotive touchscreens and center stack displays.

Panasonic Multi-Year License Renewal: On May 11, 2021, the company signed a renewal agreement with Panasonic Mobile Communications Co. Ltd. for a license to provide TouchSense software and haptic technologies in the latter’s handheld devices.

Q1FY21 Results: The company reported an increase of 14.42% in total revenue to USD 7.16 million in Q1FY21 (ending March 31, 2021) compared to USD 6.26 million in Q1FY20. Revenues from royalty and license were USD 7.07 million in Q1FY21 vs USD 6.18 million in Q1FY20. The company reported a net income of USD 2.04 million in Q1FY21, as compared to a net loss of USD 4.93 million in Q1FY20.

Key Risks: A significant portion of the company’s revenue comes from a limited number of customers, and IMMR expects that this will continue to be the case in the near future. As a result, loss of or reduction in business from major customers could harm its operating results.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Data Source: REFINITIV, Analysis by Kalkine Group)

  • % Premium/(Discount) is based on our assessment of the company’s FY21E trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

IMMR Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: IMMR has declined by 26.04% in the past 3 months and is currently leaning towards the lower band of the 52-week range of USD 5.67 to USD 16.64. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 9.24. On the technical chart, the next support level is USD 7.10. Considering the correction in the stock price in the past 3 months, strong balance sheet, no long-term debt, and associated risks, we recommend a “Speculative Buy” rating on the stock at the closing price of USD 7.98, down by 1.36% as of May 25, 2021.

* The reference data in this report has been partly sourced from REFINITIV.

* Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached or if the price closes below the support level.