Le 4 septembre 2015, 09:51 dans Humeurs • 0
AU Optronics Corporation (NYSE:AUO) is one of the top manufacturers of LCD panels in the world. Smart watch reviews In my December 31st article, I wrote that AUO has potential catalysts for share price appreciation due to its cheap valuation, technological trends and that the company was manufacturing at full capacity. AUO reported earnings in January that came in below expectations missing on EPS by about 5% and projected a weaker than previously anticipated first quarter for 2015. In this article I am going to review AUO's valuation, the demand for AUO's technology and the company's production plans to determine if my original investment thesis remains intact.
AUO's business model is different. While most companies seek to increase their market share, AUO utilizes its ability to produce a full range of foundry products to keep its production capacity running at 100% clip while trying to capture the highest margin potential at any interval. While most companies try to establish brand recognition, AUO recognizes that it is one of only two companies in the world that have the capacity to produce curved LCD panels, allowing them to avoid brand competition and to focus on market demand.
TV panel sales are AUO's bread and butter, representing almost half of its total revenue and the company is geared up to capitalize on new technology introduction. TV market demand is always going to be fueled by new products and this cycle it's the Ultra HD TV. Fewer than one million units were sold in 2013, growing to 9.3 million in 2014 with sales projected at 23.3 million in 2015.
The majority of TV sales occurs during the third and fourth quarter when most major sports events and the holiday season occur. While we wait to see how much of a wave Ultra TV makes this year, flat panel demand continues to be fueled by the increased size of television screens consumers are buying, ongoing demand for cell phones particularly in China where AUO has established very solid sales and the introduction of new products such as smart watches.
The chart for AUO tends to go in tandem with the semiconductor industry:
Chart is testing support at 200 day MA. Fundamentals support that price will rise here.
The short position has grown. AUO's multiples are so very low. Any positive earnings development will create a short squeeze.
Earnings came in lower than expected, but there were some very positive factors in AUO's report. The company has been profitable for the past two years. Net profit for fiscal year 2014 increased 325% year over year and was the highest in six years. Additionally, total debt was reduced to the lowest in four years. is a modest 8. Price to sales is a microscopic .35 while price to book is only .8. The PEG (Price to earnings growth) is a meager .2.
It's not easy finding a stock trading at such low multiples with huge profit growth. The market is not valuing into AUO's stock price any earnings growth at all. This is a good scenario to test where technicals and fundamentals work in tandem. The technicals are indicating the stock price is testing support. The fundamentals are indicating the stock is cheap. dollar is also providing a boost to AUO's earnings, which are predominantly in Asian currency.