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MagnaChip BLU products and eMagin display industry update ?3

10:39 15-Sep-20


While we wait for the Fed tomorrow, I'll take a moment to document MagnaChip's two new BLU (back light unit) products for LED televisions.  MX has been rising toward (unreasonable, in my opinion) 5-year highs along with the rest of the market, and I note this because I see it as the clearest sign yet the AMOLED televisions are destined to go the way of plasma models.  That said, AMOLED screens should continue gather more and more of the mobile space, so long as America continues taking imports from China.  Even in mobile, though, the developments in TADFs are gradually moving from writing on the wall toward market reality.  Would-be UDC investors should be more concerned about that than the company hype.

There is still potential for technological growth in the micro-displays that eMagin produces.  The rebate rate on EMAN is still above 20%, so there are bound to be spikes and valleys, but those who took advantage of the pre-election gamble that I've been tracking might view this week as something of a pivot point.  Barring a surprise from Apple today, or Facebook tomorrow, my outlook is still that the short term bear case for eMagin has been eviscerated, but that the company will chop along just below breakeven for the next 2-3 years before AR/VR comes to another make or break consumer commercialization moment.  Facebook will be the more important of the two, as its existing Oculus product uses an AMOLED microdisplay.  If the next iteration switches away from that, it would be a big blow. 

In the meantime, eMagin still has the military, which comprises 70% of revenue, going for it.  That may continue to help with an eventual push for American production, goaded by East-West relations and this morning's disappointing FOMC numbers, which showed growth in industrial production almost grinding to a halt in August.  Even without continued support, it was noted in the most recent presentation that half of military sales are outside the U.S., and that looks to me like a sales market that is very likely to grow.  Thus I see the pivot this week as more about short-term versus long-term, than actual business fundamentals.  Know thyself when investing.