Shorting Immersion Corporation as Shares Reverse

On Thursday, our Under the Radar Movers newsletter suggested shorting small cap technology stock Immersion Corporation (NASDAQ: IMMR):

We love how well developed the selling of Immersion shares has been. Rather than a sharp, v-shaped reversal — which may or may not follow through — we’ve seen a bowl-shaped transition from an uptrend to a downtrend. This ups the odds of downside follow-through, as there’s been no price “shock” to invite a sudden wave of buying.

IMMR won’t be a monster winner, but there’s a chance it could move back to the lower $8’s.

Our Under the Radar Movers newsletter has a more detailed discussion about Immersion Corporations technical chart along with a shorting strategy:

Small cap Immersion Corporation is the leading innovator of touch feedback technology, also known as haptics. The Company provides technology solutions for creating immersive and realistic experiences that enhance digital interactions by engaging users’ sense of touch. With more than 2,300 issued or pending patents, Immersion Corporation’s technology has been adopted in more than 3 billion digital devices, and provides haptics in mobile, automotive, advertising, gaming, medical and consumer electronics products. Immersion is headquartered in San Jose, California with offices worldwide.

Immersion Corporation has been reasonably active on the news front with the following news:

Jan 13, 2017 Immersion and Nintendo Enter into Agreement to Bring Immersion’s TouchSense Technology to the Nintendo Switch System Jan 5, 2017 Immersion Enters Into Multi-Year Licensing Agreement With Grayhill Dec 6, 2016 Immersion Renews License Agreement with LG Electronics for TouchSense庐 Technology and Basic Haptics Patent Portfolio Nov 2, 2016 Immersion Launches Haptic Ad Service Enabling “Touch Effects” in Mobile Video Ads

In early November, Immersion Corporation alsoreported thattotal third quarter revenues increased 84% to $26.3 million(including recognition of a non-recurring license fee from Samsung of $19.0 million) with royalty and license revenues of $26.0 million up 87% from the same period last year. Net income was $7.0 million (including a tax provision of $3.8 million that includes certain non-cash tax benefits and expenses associated withtheCompanysinternational tax structure)compared to net income of $184,000. As of September 30, 2016, Immersion Corporations cash, cash equivalents and short term investments were $94.9 million compared to $56.3 million as of June 30, 2016. The CEO commented:

We exited the quarter with a strong balance sheet and positive momentum as we expanded our customer base across the markets we serve. The opportunities in front of us continue to increase as haptics is being more broadly adopted than ever, across existing markets as well as new and emerging areas. Immersions foundation of innovation and the strength of our patent portfolio makes us uniquely positioned to lead and succeed in this market. As we enter the fourth quarter, we continue to expect 2016 revenues to be in the range of $55 to $65 million, which we now anticipate generating bottom line results of a net loss between $11 million and $800,000 and between a non-GAAP net loss of $6 million and non-GAAP net income of $4 million.

In other words, thelast reported quarter was a fluke due to the Samsung fee.

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