Roth MKM analyst Suji Desilva, in a research report published on September 17, 2024, provided an update on Pixelworks Inc. (PXLW:NASDAQ) following the company's announcement of securing Universal Studios as its second major domestic licensee for its TrueCut motion grading platform. The analyst maintained a Buy rating and a 12-month price target of US$2.00 on the stock.
Pixelworks announced a multi-title, multi-year agreement with Universal Studios for its TrueCut technology, which will enable motion grading across 2D/3D content for theaters, streaming platforms, and next-gen AR/VR headsets.
Desilva noted, "We had expected additional studios to follow the lead of Disney (DIS-NC) back in January 2024 and see this second win as affirming that thesis somewhat."
The analyst viewed this development positively, stating, "We are encouraged by PXLW's second major studio win for the company's TrueCut motion grading technology. We continue to see TrueCut as a high-margin licensing/royalty opportunity for the company, as well as an incremental diversifying revenue stream versus core mobile."
Desilva highlighted the potential financial impact, commenting, "While the financial impact of this deal remains to be determined, we note that TrueCut should provide high-margin licensing revenue with additional opportunity from per-end device royalties."
Pixelworks' strategic focus includes diversifying from its strong China mobile processor position and exploring a listing of its Shanghai subsidiary on China exchanges. The analyst noted, "With traction at TrueCut, we are encouraged that PXLW is diversifying from its strong China mobile processor position."
Roth MKM's valuation methodology for Pixelworks is based on a multiple of enterprise value to sales. "Our target price of US$2 equates to a CY25 EV/Sales of 1x, a discount to the semiconductor median of 2x reflecting PXLW emerging secular opportunity," Desilva explained.
With a Buy rating and a price target of US$2.00, representing a potential return of approximately 203% from the price at the time of the report of US$0.66, Roth MKM sees significant upside potential for Pixelworks.
Desilva concluded, "We maintain our Buy rating," emphasizing the company's progress in diversifying its revenue streams and the potential of its TrueCut technology in the entertainment industry.
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Disclosures for Roth MKM, Pixelworks Inc., September 17, 2024
Regulation Analyst Certification ("Reg AC"): The research analyst primarily responsible for the content of this report certifies the following under Reg AC: I hereby certify that all views expressed in this report accurately reflect my personal views about the subject company or companies and its or their securities. I also certify that no part of my compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in this report.
Disclosures: ROTH makes a market in shares of Pixelworks, Inc. and as such, buys and sells from customers on a principal basis. Shares of Pixelworks, Inc. may be subject to the Securities and Exchange Commission's Penny Stock Rules, which may set forth sales practice requirements for certain low-priced securities.
ROTH Capital Partners, LLC expects to receive or intends to seek compensation for investment banking or other business relationships with the covered companies mentioned in this report in the next three months. The material, information and facts discussed in this report other than the information regarding ROTH Capital Partners, LLC and its affiliates, are from sources believed to be reliable, but are in no way guaranteed to be complete or accurate. This report should not be used as a complete analysis of the company, industry or security discussed in the report. Additional information is available upon request. This is not, however, an offer or solicitation of the securities discussed. Any opinions or estimates in this report are subject to change without notice. An investment in the stock may involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Additionally, an investment in the stock may involve a high degree of risk and may not be suitable for all investors. No part of this report
