OmniVision Technologies, Inc. (NASDAQ: OVTI) stepped into the earnings spotlight last night, with the company reporting a fourth-quarter loss of $20.1 million, or 40 cents per share.
Excluding items, the quarterly loss would have been 30 cents per share. Revenue for the period fell 47% to $89.1 million, while gross margin contracted from 27.2% to 17%. Analysts were expecting a wider loss of 46 cents per share on slimmer revenue of $68.3 million.
Looking ahead, OVTI expects a fiscal first-quarter adjusted loss of seven cents to 16 cents per share, with revenue ranging between $90 million and $100 million. The forecast was unexpectedly upbeat; analysts surveyed by Thomson Reuters are expecting a first-quarter loss of 23 cents per share on $74 million in revenue.
As a result, OVTI scored an upgrade this morning from Needham, with the brokerage firm raising its rating from "hold" to "buy." The shares surged roughly 8% in the wake of all these bullish reports, extending the equity's year-to-date rally of 101.5%.
From a technical perspective, OVTI has now gapped above support from its 10-week moving average, which has been in place since the second week of January. The stock's momentum could potentially stall out near the $12 level, which is home to its declining 20-month moving average. OVTI hasn't finished a month on the north side of this trendline since March 2008.
However, a rush to cover by short sellers could help to propel the stock through this looming obstacle. Short interest accounts for a respectable 6.2% of OVTI's float, and it would take 5.8 trading days for all of these bearish bets to be repurchased at the security's average daily volume. In light of the better-than-expected fourth-quarter results, along with the company's sunny first-quarter outlook, it's a safe bet that many of these skeptical shorts will be rushing for the exits.
Elizabeth Harrow is an analyst and financial writer in the research department at Schaeffer's Investment Research. She is featured in the video series Schaeffer's Daily Q&A on SchaeffersResearch.com.
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