InvenSense (NYSE:INVN) Stock Waning, Is It Still Worth Buying?
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InvenSense (NYSE:INVN) dipped down to an almost 52 week low three weeks when the company posted disastrous results in the second quarter. People were expecting otherwise, since InvenSense (NYSE:INVN) came into Apple Inc (NASDAQ:AAPL)’s favor but not even the embrace of the biggest tech company could reverse its sales decline. InvenSense (NYSE:INVN) missed both top of the line and bottom line market expectations and now investors are looking at the stock with dubious eyes.
The company’s own forecast fell way short of the eventual result. Alarm bells are ringing for InvenSense (NYSE:INVN). InvenSense (NYSE:INVN) stock fell by 24 percent and for that Investors are being held responsible, since they dumped the stock without caution. Analysts on the market had seen it coming although for some reason InvenSense (NYSE:INVN) is surprised. Since the company posted its second quarter release, the next three weeks cost them 14 percent.
The irony is that now it’s trading below 35 percent of what it was trading three weeks ago. In the previous quarter, InvenSense (NYSE:INVN) posted 0.05 dollar per share when analysts anticipated 0.17 dollars. The company didn’t do badly in the top line, posting 90.2 million against the expected 90.5 million. The real problem was created by the gross margin which slid down by 37 percent comparative to market expectations and company’s own forecast.
The company’s management addressed the slump, claiming that they lost money on inventory because the excess inventory became worthless. This cost InvenSense (NYSE:INVN) 7.4 million dollars, resulting in 8 percent decline in gross margin. The company was also pressurized into raising its prices from the giants Apple Inc (NASDAQ:AAPL) and Samsung. That took a toll on the company’s finances resulting in losses from time to time.
InvenSense (NYSE:INVN) stock suffered earlier too when the company was building up its inventory expecting Apple Inc (NASDAQ:AAPL) to buy from it. Apple Inc (NASDAQ:AAPL) has a notorious reputation when it comes to applying pressure on its suppliers. This can become a critical issue for the company as InvenSense (NYSE:INVN) is now in a volatile position and further financial losses can weaken the company to a severe state, rendering it vulnerable and driven to the verge of bankruptcy.
The company has assured investors that next year would bring 25-30 percent increase in the gross margin. Analysts are also vouching for the company to recover from its miserable position and post 43 percent growth next year. Since the company is working for Apple Inc (NASDAQ:AAPL), Apple Inc (NASDAQ:AAPL) Watch’s release could be a big thing for the company. Apple Inc (NASDAQ:AAPL) Watch is expected to generate a lot of sales.
If that happens, not only InvenSense (NYSE:INVN) will recover from its current position, it will be regarded as one of the best suppliers around in the market. There’s a notion that InvenSense (NYSE:INVN) is underpriced; once Apple Inc (NASDAQ:AAPL) Watch strikes the market, that notion will diminish, along with the company’s problems.