Today we have an insanely speculative idea: take shares in augmented reality glasses manufacturer Vuzix (NASDAQ: VUZI), to cash in on their rebound.
Growth potential and validity: 32% behind 12 Months; 98% behind 3 of the year; 395% behind 20 years.
Why stocks can go up: because they fell, but the hype around the topic of augmented reality will attract investors into these stocks.
How do we act: we take shares now by 6,15 $.
When creating the material, sources were used, inaccessible to users from the Russian Federation. We hope, Do you know, what to do.
No guarantees
Our reflections are based on the analysis of the company's business and the personal experience of our investors, but remember: not a fact, that the investment idea will work like this, as we expect. Everything, what we write, are forecasts and hypotheses, not a call to action. To rely on our reflections or not – it's up to you.
And what is there with the author's forecasts
Research, like this and this, talk about, that the accuracy of target price predictions is low. And that's ok: there are always too many surprises on the stock exchange and accurate forecasts are rarely realized. If the situation were reversed, then funds based on computer algorithms would show results better than people, but alas, they work worse.
So we're not trying to build complex models.. The profitability forecast in the article is the author's expectations. We specify this forecast for the landmark. As with the investment idea in general, readers decide for themselves, it is worth trusting the author and focusing on the forecast or not.
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Investment editorial office
What the company makes money on
The company is designing, assembly and sale of augmented reality glasses. The production of the components themselves is carried out mainly by the Chinese counterparties of the company.. Glasses, which complement the vision of the physical world with projections and holograms, - what does it look like, can be viewed on the company's channel.
A company's annual report gives a rough idea of its business. Exemplary because, what is this, in fact, still a startup: the company has less than $20 million in annual sales. It needs to be understood, because in a couple of years the company can change beyond recognition.
Its revenue is divided into the following segments:
- Sales of goods - 87,04%. Sales of company devices. Segment gross margin — 7,04% from its proceeds.
- Design Services — 12,96%. Services for the development of similar devices for other companies. Segment gross margin — 81,21% from its proceeds.
In theory, the company's technology can be used in almost all industries - from manufacturing and defense to the consumer sector..
Company revenue by country:
- USA - 38%.
- Japan - 22%.
- France - 7%.
- Germany - 3%.
- Singapore — 1%.
- China - 1%.
- Other, unnamed countries - 28%.
The company is hopelessly unprofitable: its annual loss equals two annual gains. Profit is mainly eaten by managers and R&D.
Arguments in favor of the company
Fell down. Over the past year, the company's shares have fallen sharply - from 30.57 to 6,06 $. This was partly due to the unrealistic valuation of her business., partly played the role of the "startup" of the company. Such a drop gives us the opportunity to pick up these stocks in anticipation of a rebound..
Few. In absolute numbers, the company is quite inexpensive: its capitalization is 385.6 million dollars. This is very small by American standards and will help the stock to rise sharply in case of positive news..
Something about perspective. In the eyes of most, Vuzix is a representative of the “super promising field of augmented reality”. The CAGR of Vuzix's target market will be 73% per year before 2026, when its size should reach 16.2 billion. On 20% it's healthcare, and the rest 80% – use of glasses and company services by the corporate sector.
The seeming prospects of the market will contribute to pumping quotes. Maybe, even Robinhood users will swoop down on these promotions, like flies to jam. However, even institutional investors can take these shares, given the practical usefulness of technology.
Still, the topic with augmented reality is really promising - the advantages for different industries are simply colossal: this will greatly facilitate the work of specialists in all industries and make the most of the available labor resources. So I wouldn't be surprised, having learned, that Vuzix signed a contract with some major player like the Ministry of Defense, - from what its shares can fly into the stratosphere.
Can buy. Leading US social platforms under attack: On the one side, their core advertising business is being squeezed by antitrust regulators. On the other hand, the US political establishment wants to clip their wings, in order to minimize the risks of these platforms being used by political opponents.
Therefore, in desperation, they buy up different startups or invest in them., to diversify your risks. So it's highly likely, that one of the Internet giants, if not, buys the entire Vuzix as a whole, then become a major partner. However, given the small capitalization of Vuzix and the recent drop in stocks, it may well be bought with a significant premium.
What can get in the way
startup. Company P / S — 22 even after stocks fell (sic!), and its share in its own target market is about 20 times less than its cost - although in terms of capitalization, Vuzix costs about 60% your target market. And besides this, that the company is unprofitable. So,, its shares may fall again in six - and only then the company will be bought.
The cruelest year. Raw material and shipping cost issues will hit the company particularly hard this year, since even more established enterprises like Intel suffer from such problems.
Bankruptcy. Basically, the money at the disposal of the company may be enough for another 3-4 years of work in the current mode - approximately $ 128 million in accounts. But, given the rising cost of both high-tech components, and the work of technical specialists, I would prepare for that, that she will be engaged in additional issue of shares, what can cause quotes to fall. Well, or will not work and go bankrupt. Given its financial performance, I doubt that, that she can get a sufficient amount of credit at an acceptable interest.
In the case of Vuzix, you need to understand, what are you investing in a risky startup.
What's the bottom line?
Shares can be taken now by 6,15 $. And then there are several options:
- wait for growth until 8 $. This is a relatively modest goal., and I think, that we will reach it in the next 12 Months: during this time, the shares will grow or due to the influx of investors, or some good speculative news. Given the popularity of the topic, the likelihood of this kind of news is very high;
- wait for growth until 12 $. Here it is worth counting on three years. This is a better option, but not so unrealistic, given the growing interest of the public and the corporate sector in the field of augmented reality. Also, over a longer distance, the probability of buying a company increases.;
- keep shares next 20 years of hope, that they will return to the bar 30 $. Probably, this will never happen: company during this time or buy, or she will go bankrupt. So this is the way for those, who strongly, strongly believes in the idea of augmented reality.
It should be remembered, that this idea is highly speculative. So invest in it only that money, which would otherwise be burned in the furnace. Yes, This is what investing in startups looks like.
