Pixelworks stock is a buy, Roth says

Following the release of preliminary third quarter expectations, Roth MKM analyst Suji Desilva remains bullish on Pixelworks (Pixelworks Stock Quote, Chart, News, Analysts, Financials Nasdaq:PXLW).

On October 4, PXLW reported that it expects third quarter revenue will come in at $16-million, a topline that would be up 18 per cent over the same period last year.

“Mobile revenue in the third quarter is expected to increase over 20% sequentially and over 35% year-over-year to a new quarterly record and anticipated to represent more than 50% of total revenue,” commented Todd DeBonis, President and CEO of Pixelworks. “We have experienced a positive response on the first IRX-certified smartphone models launched by our tier-one customers, including multiple upside orders. Additionally, our collaborative engagements with the top gaming studios, including Nuverse-ByteDance, Perfect World and NetEase, have been well received by the mobile gaming ecosystem. As a result, our bookings to-date fully support continued sequential growth in mobile with total revenue for the fourth quarter expected to be at least $19 million.”

The analyst gave his take on the development.

“PXLW released prelim 3Q23 revenue expectations of $16m (+17.5% q/q), in-line with prior guidance,” he said. “We believe PXLW is seeing strong traction with its new smartphone models where consumer are responding well to IRX-gaming certified smartphone models. Additionally, we believe PXLW efforts to seed the mobile gaming market through a top gaming studio partnership is bearing fruit. Management expects 4Q23 revenue of $~19m (+~20% q/q), above consensus expectations of $17m (+7% q/q), further reflecting the company’s mobile momentum. Given this updated guidance, we gain stronger confidence in our CY24 expectations for continued strong y/y growth.”

In a research update to clients October 4, Desilva maintained his “Buy” rating and one-year price target of $3.00 on PXLW, which closed October 3 at $1.07.

Desilva thinks Pixelworks will post an EPS loss of $0.25 on revenue of $72.5-million in fiscal 2024.