Miami, FL – August 8, 2018 (EmergingGrowth.com NewsWire) — EmergingGrowth.com, a leading independent small cap media portal with an extensive history of providing unparalleled content for the Emerging Growth markets and companies, reports on Kopin Corp. (NASDAQ: KOPN).
Kopin Corp. (NASDAQ: KOPN) is a leading manufacturer of wearable technologies. In conjunction with recent announcement of their 2nd quarter 2018 financial results which disappointed investors, shares have shed value by approximately 32% year to date.
On its 2nd quarter 2018 briefing, Kopin reported a net loss of $9.2 million or $0.13 per share. Based on market expectations, analysts estimated that net loss for the 2nd quarter would be narrower at $0.11 per share. On a trailing 12-month basis, the company registered a net loss of $23 million, or $0.32 earnings per share.
However, investors were disappointed with the news that Kopin CEO John Fan revised the full year 2018 guidance downward to at least $30 million, which is 25% lower than the previous forecasts. Analysts however, estimate that they will be able to end this year with revenues of $37.5 million, a 35% year-on-year increase.
These short-term market gyrations discount the company’s long-term potential in the wearables market. According to International Data Corp. (IDC) research, the overall wearables market is projected to grow from 113.2 million shipments in 2017 to 222.3 million in 2021 or an annual compounded growth rate of 18.4%.
Kopin Corp. has already made good strides in various business segments including consumer, military, and enterprise.
For example, the major highlight this year is the commercialization of SOLOS, which are smart glasses for cyclists and runners. The consumer market for cycling and running smart glasses represents a $334 million opportunity based only on a meager 1% market penetration. Last month, SOLOS was named as Official Smart Glasses Partner of Ironman events, which will provide exposure to SOLOS and could easily improve its adoption cycle.
Kopin also announced an update that they have received their first production orders for a $100 million weapons sights program. The initial shipment is expected on October of this year. In addition, they have also reached an agreement with defense contractor giant Lockheed Martin (NYSE: LMT) for a new order of F-35 fighter jet pilot helmets. This contract represents a $100 million opportunity for the company.
In terms of the enterprise segment, it has partnered with various notable names in the industry such as Fujitsu, Google (NASDAQ: GOOG), Lenovo, RealWear, Scott Safety and Vuzix. Kopin has leveraged its portfolio of key technologies that were developed over 30 years, which allowed them to partner with these companies. It is important to note that the company has more than 300 patents related to wearable, warding off potential competitors in their target markets.
While Kopin is one of the major players in the wearables market, no one has really looked into the company as a possible investment. The main reason has been their lackluster financial performance.
At first glance, it does not look like a good pick-up for a growth investor. Over the last 6 years, the company has accumulated cash burn amounting to $133 million. For the same period, sales have not been consistently performing ranging from $23 million to $32 million.
Over the last years, it looks like the company was mainly focused on enhancing their product portfolio. This explains why their top-line was lower than expected. On the other hand, recent years that they have started to partner with various corporate and military clients. Finally, the whole prospects of wearables gained traction with the full adoption of smartphones.
The silver lining is that the company exhibits adequate financial resources with cash on hand of $61. However, it seems they may need to raise additional capital with average annual cash burn of around $22 million. Despite this, the recent contracts might provide them additional cash flow to stay afloat while there is huge traction in the consumers and enterprise segment.
At the current price levels of $2.25, the company already trades at 6.0x sales, still below historical price over sales of 7.8x. Assuming the company would be able to achieve sales of $50 million based on a 25% growth rate, the shares should have a one-year price target of $3.94, implying a 75% upside from current price levels.
In the long run, the company should be able to reach its net profit targets underpinned by tailwinds in the wearables market. It might be a good idea to start accumulating Kopin Corp. shares now before the market re-rates this undiscovered gem.
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