AU Optronics Corp. – An Attractive Trade

AU Optronics Corp. (AUO) designs, develops, manufactures, assembles and markets flat panel displays. The Company’s principal products are thin-film transistor liquid crystal display (TFT-LCD) panels. Its panels are used in computer products, such as notebook computers and desktop monitors; consumer electronics products, such as digital cameras, digital camcorder, car television, car navigation systems and portable digital versatile disc (DVD) players, and liquid crystal display (LCD) televisions. It offers small to medium-size panels, as well as large-size panels. AU Optronics Corp. sells its panels primarily to original equipment manufacturing service providers.

Recent News
Share price of AUO were higher March 20 after Jefferies & Co.’s Brian White launched coverage of the company with a Buy rating and $25 price target. White says the LCD panel market will be “tight” this year, following “capacity underinvestment in recent years.” He says recent visits with Taiwanese LCD panel makers lead him to conclude that “the LCD panel environment will be tight in 2008 and pricing reasonable.” He says AUO is headed for “another year of record sales and profits.” He sees EPS of $2.79 this year and $3.11 in 2009. That certainly makes the stock look cheap: at current levels the shares trade for under 7x 2008 estimates. “AU Optronics is one of the most inexpensive stocks in our coverage universe,” he writes, “yet the company’s growth trends and profit metrics are currently among the highest.”

AU Optronics (AUO) has dismissed a Taiwan newspaper report that claims Sony is shifting some of its TV panel orders from the Taiwan-based LCD panel maker to its Japanese competitor Sharp. The share price of AUO dropped on March 24 in contrast to a large overall rise in the Taiwan stock market. The paper said investors were selling AUO shares on the possibility of Sony shifting orders.

Shares of AU Optronics Corp. dropped again on March 26 after television maker Jabil Circuit Inc. guided its third quarter below Wall Street’s expectations. Jefferies & Co. analyst Brian White said news from Jabil – which uses LCD panels when making TVs, among many other products – could likely hurt shares of AU Optronics and competitor Corning Inc. “We continue to believe investors should remain selective when investing within the electronics supply chain in 2008 in light of a concerning economic environment and volatile demand trends,” White said in a note to clients. Yet demand for LCD products will likely grow, said White, who increased his industry forecast. He now expects 2008 LCD glass shipments of 2.23 billion square feet, or 27 percent growth compared with a previous 23 percent growth expectation. Visits to Taiwanese plants helped formulate the bullish outlook, White said.

Quick Technical Analysis

  • Relative Strength Index (RSI) is at 40.60, (entering slightly oversold zone)
  • Slow Stochastics is at 27.60, (almost oversold)
  • Money Flow Index (MFI) is at 48.91 and
  • 50-Day Moving Avg (DMA) is 17.77.

Current Price: $17.04
Entry Price: $16.00 (price which has been good support + oversold RSI indicator)
Exit Price: $17.60 (just below the 50-DMA)
Gain = 10% Profit

Conclusion: All the current information makes AUO an attractive trade at $16.

Source: Google Finance

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