Many companies in the Tailwinds (TW) coverage universe reported earnings this last week. Here we discuss each of their results (alphabetically), along with a preview of what we expect going forward.
AQMS: from TW’s perspective, this quarter is yet one more of kick the can operationally. It’s disappointing that they haven’t been able to get the equipment up and running and appear to be still a longs way from doing so on a 24-7 basis.
The stock took it on the chin when they reported. This is due to the big run up in the shares prior to the quarter and lots of comments on the call about additional financing. The other big questions here revolve around getting equipment debugged and what exactly the cost of producing lead is (which is still a major unknown at this time).
For those who follow TWs closely, we did as we foretold and sold out when the shares had doubled off their lows. At this time, we are on the sidelines and, based on the burn rate, we think AQMS will revisit capital markets in the next 2-5 months, at which time we’ll revisit the situation.
We remain constructive on the company and the technology. New management, and a much stronger board, leaves them well positioned to eventually start executing on their promise. The upside is tremendous, but financing and operational success must come first.
CDXC: another stock that was lower on their earnings. However, ChromaDex had really foretold a weaker quarter when they last presented earnings, as they guided to down sequentially. Therefore, this shouldn’t have been a major surprise.
Can they really launch sales in the second half of the year as they guided? We believe it’s very possible. Watsons remains pleased with the product and their sales are beating internal expectations. Additionally, in the US, volumes are continually growing and there are numerous studies that continue to show very positive medical benefits for Niagen.
Going into the quarter, we had reduced our position when the stock moved up on the UC Boulder trial results. We remain committed to this company, however will not be looking to go big in it until we get a sense that the Q3 ramp up is actually happening. At the end of the day, Niagen could be huge and we don’t want to miss that move. However, we’ll have time to add once it’s clear that the uptick in volumes is transpiring in real time.
IWSY: and, here we go again? ImageWare is another company that reported disappointing results and talked positively about future growth. But, not so fast on suggesting investors hold off here. All indicators read that IWSY is in the quarter that will mark their inflection point.
Contracts are supposedly coming in this quarter that will demonstrate the ramp of their business. Per the CEO, “that every project is making progress and our partners have given us good reason to believe that several will close in the second quarter.”
Is their CEO the boy who cried wolf? Will IWSY disappoint again? TW is willing to bet that this is not the case. We are on board ImageWare and will likely be taking the position up to an overweight as the quarter moves forward. Hopefully our channel checks will help us get a sense of the ramp…if that’s the case, we’ll gladly share that information with the world.
KOPN: is the ramp in Augmented Reality starting now? It appears to be the case. Kopin is fully funded for several years, has guided to $35-40M in revenues in 2018, and believes they will go cash-flow positive in 2019.
Kopin also announced a design win with a tier one customer for a global rollout of AR headware. Will this be the new Google Glass? It seems likely, but might be better if it wasn’t as we know they’ll win that…a new player would be incrementally positive.
It’s a foregone conclusion that AR and VR are going to be big. The form the consumer and enterprise products takes remains the biggest question in this space. Which is why we like KOPN…they supply to all major manufacturers of AR and VR. When the industry launches, Kopin will benefit. Launch appears to be imminent. We are long and will likely be adding.
RESN: having backed up the truck at $3.30 in Resonant, we are very pleased to see the business update reflected what we already knew. RESN is getting design wins and taking share in a very rapidly growing space.
Even better, management decided to actually speak about potential revenues rather than providing more lowball guidance, which slammed the stock last quarter.
Fully funded to cash flow positive (a 2019 event), and winning designs quite frequently, we expect RESN shares to continue their uptrend. Eventually we will see a teardown of a tier one phone that has multiple RESN designs. When this happens, the stock could go to the next level. TWs remains very long and happily so.
SGBX: with a low market cap, low burn rate, and a very large backlog, SG Blocks remains a compelling risk/reward for TWs investors. Their latest quarter was positive in that they kept their guidance for the year unchanged. If they can accomplish the $20M in revenue they predict, the Company will generate positive earnings and cash flow for the year.
Next year should be even better, as they have guided to much higher revenues. Throw in more contracts, which they say is likely based on the recent success of their HOLA project, and SG could generate over $1 in 2019 earnings per share.
We are long SGBX and will continue acquiring. Asymmetrical risk/reward here.
VUZI: another in a string of mediocre results from Vuzix sent the shares downwards yet again. Can these guys start ramping sales? The AR space is hot, but it’s still on the come.
We would like to see the rubber really hit the road before buying back in to VUZI. Will this happen in Q2? At this time, we have no way of knowing.Tailwinds' Disclaimers & Disclosures: For a full list of disclaimers and disclosures, please visit http://