We live in a surveillance society. My first direct exposure to this fact occurred last week. I received a traffic ticket in the mail for making a right turn at a red light when the roads were completely deserted. Not to mention I came to full stop prior to making the very safe turn. The ticket was for a whopping $330, and along with it came high definition photos of my car and licence plate. I was furious!
What happened next made me even more upset.
I called my local attorney’s office that specializes in fighting traffic tickets to see what could be done in this case. Heck, right turns on red lights should be legal unless clearly marked otherwise. What the lawyer told me was very disconcerting. He said, “You can’t fight the cameras.”
Santa Clara, Calif.-based OmniVision Technologies, Inc. (NASDAQ:OVTI) was founded in 1995 and is part of the semiconductor industry. With a market cap of just over $880 million, its particular niche is developing, designing and marketing semiconductor image-sensor devices for a variety of manufacturers. Its devices are used in the webcam, surveillance, digital camera, mobile phone, automotive and medical sectors. Although its core markets are mobile phones and entertainment, it is expanding quickly into the other listed spaces.
OmniVision Technologies, Inc. (NASDAQ:OVTI) produced record revenues in fiscal year 2013, ended April 30, of $1.4 billion due in part to the success of the BSI-2 based sensors. These sensors offer “better image quality, enhanced color reproduction and improved overall camera performance in ultra-small form factors.”
In total, the company shipped over 855 million sensors during the fiscal year. However, to meet demand, investment in new equipment was needed, which resulted in declines in gross margins and net income, which came in at just under $43 million, down from $65.8 million in fiscal 2012.
First-quarter fiscal 2014 results are scheduled to be released on Aug. 29. Based on the underlying economic factors and the company’s strong ramp up, I am betting on outperformance during this quarter.
OmniVision Technologies, Inc. (NASDAQ:OVTI) is a supplier for Apple Inc. (NASDAQ:AAPL); therefore, investors often view it as a proxy for Apple Inc. (NASDAQ:AAPL) stock. The relationship with Apple is only a negative when AAPL shares are moving lower. But Apple Inc. (NASDAQ:AAPL) has been racing higher since late June, and is currently flirting with the $500 level. This can only help OmniVision Technologies, Inc. (NASDAQ:OVTI).
While mobile phones and tablets are a substantial part of OmniVision’s business, its other segments are rapidly growing. These additional segments should have an increasingly positive impact on the company’s bottom line due to industry and societal trends.
The most exciting of the emerging markets for the company is the automotive sector. New automobile technology will require up to five cameras per vehicle. OmniVision Technologies, Inc. (NASDAQ:OVTI) has played a key role in this evolution by securing design wins at European and domestic auto manufacturers.
In addition, as I experienced with the camera ticket, security and surveillance use of the company’s products is rapidly increasing. Not to mention, the company has made aggressive acquisitions that should provide a competitive advantage.
The purchase of Aurora Systems in 2010 should help the company capitalize on trends in the emerging video-projection consumer market. And the acquisition of $65 million worth of image-sensor patents and patent applications from Eastman Kodak Company (OTCMKTS:EKDKQ) protect intellectual property and create barriers to entry for competitors.
Taking a look at the technical picture, OVTI just broke higher from a clear double-bottom on the daily chart. I like the stock on a breakout above $17.13.
Recommended Trade Setup
— Buy OVTI on a break above $17.13
— Set stop-loss at $14.50
— Set initial price target at $25 for a potential 46% gain in nine months
$1,000 Per Month Trading System
You could collect $1,000 or more per month without buying a single stock. Click here to learn how…
