Investors advised to ‘hold’ Imagination Technologies despite positive outlook

As Imagination Technologies updates the market Helal Miah, investment research analyst at The Share Centre, explains what it means for investors.

“Imagination Technologies’ interim management statement should please investors as the outlook for the company looks fairly positive. There has been an encouraging level of licensing activity across the main product areas and the average royalty rate improved a little compared to the same period last year. Traditionally royalty revenues are weighted towards the second half, and with a number of product launches in the pipeline, the group expect this effect to be more pronounced this year.

“Management are excited about the launch of the new CPU and processor core units which target high volume market applications. Imagination also announced the launch of the industry’s smallest Android GPU, targeting lower end units and offering longer battery life. Investors should acknowledge that the Pure business has performed in line with expectations and the group is seeing interest in licensing of the underlying technologies that power its new range of products.

“Although today’s statement looks relatively bullish, we remain wary of the longer term effects of increased competition in the sector and continue to recommend investors ‘hold’ Imagination Technologies. However, this could be an interesting stock for the contrarian investor as Apple’s new range of products could provide a boost, especially if wearable devices take off.”