Imagination Technologies, whose graphic chip designs are used in products from the iPhone to set-top boxes, has been boosted recently by takeover talk and hopes of a good set of full year figures.
So it was almost inevitable that when the numbers came in a little below expectations today, the company's shares have suffered, losing 9.1p to 290.9p.
The company - where Apple has a 9% stake and Intel owns 15% - said profits had tripled to £10.2m but this was slightly under the near £11m or so some analysts had been forecasting. But many brokers were still positive on the company's prospects. Nick James at Panmure Gordon said:
Licensing revenue is stronger than expected, offset by royalties below expectations, but still demonstrating 68% underlying growth in royalties. [Consumer electronics business] Pure contributed lower than expected revenue, and slightly worse operating loss. The Pure miss drove group revenue 2% below expectations.
The results adequately demonstrate Imagination's growth and future prospects in which we maintain high conviction. The stock has had a strong run and probably needed a material revenue beat to see further strength in the short term. We will be reviewing our price target post the results and would be buyers of the stock on any dips as it digests recent gains.
KBC Peel Hunt said:
[There was] no change to guidance for a further 60% growth in volumes this year, driven by new chips shipping and strong end-market growth. Although perfectly reasonable, the maintained guidance may take some wind out of the sails of the 30% rise since May. We believe takeover speculation is a red herring, although we do see a takeover of Imagination as relatively more realistic than a bid for ARM.
We remain buyers on the basis of market leadership and strong earnings drivers through end-market growth and operational gearing. However, we are a little concerned by the range of forecasts in the market, some appearing to be 80% higher than ours.
