Energous: Bet On Its First-To-Market Advantage
Feb. 27, 2018 4:45 PM ET|16 comments| About: Energous Corp. (WATT)
Josh Rudnik
Josh Rudnik
Portfolio strategy, hedge fund manager, long/short equity
MARKETPLACEAbsolute Returns
(1,581 followers)
Summary
WATT is breaking out higher on strong guidance.
Its innovative wireless charging capabilities are beginning to become commercially viable.
I am buying stock in the name.
This idea was discussed in more depth with members of my private investing community, Absolute Returns.
Energous (WATT) is breaking out higher following very optimistic guidance by management. The company is an early-stage wireless charging company that is rapidly increasing its IP. Moreover, the company recently went from its developmental stage to a commercialized company. Its share price reflects this by recently breaking out higher on strong results. I am buying stock in this name prior to a potentially strong move higher in coming years.
Price Action
WATT's share price is breaking out higher across multi time-frames. Although the company has not been public for very long, its share price looks to have formed a solid base formation, which it is now moving higher out of. Since 2014, WATT has trended sideways between $5-20. Although the stock is consolidating on its hourly chart, the breakout above $20 appears to have been a strong level of resistance on the minute time-frame.
Collectively, the stock is breaking out higher on strong fundamental support. WATT is in the early stages of innovating the wireless charging space, which its share price reflects. I am buying stock at these levels, setting a stop-loss point at $20.50, just below its recent breakout price. Should its share price reverse lower, it will signal investor sentiment is not quite strong enough in this first-to-market producer, leading me to sell shares and wait for renewed enthusiasm on some future catalyst.
Source: Trading View
Fundamental Narrative
WATT is attempting to redefine wireless charging, which should benefit shareholders in coming years. In recent days, the company announced that it would be receiving a U.S. patent for wireless charging methods and systems for game controllers. Its recent invention provides wireless charging methods and systems for powering game controllers. More specifications of the patent are listed below:
"The methods and systems may include one or more transmitters and one or more receivers. In some embodiments the transmitters and receivers may be embedded to game console and game controllers, respectively. In other embodiments, the transmitters and receivers may be connected as a separate device to the game console and game controllers, respectively. The method may include wireless power transmission through suitable techniques such as pocket-forming."
This is significant considering the strong demand for gaming and similar technologies. As a first mover in the space, WATT could capture significant market share in coming years.
According to management, 2017 was a defining year for the wireless power industry and for WATT in particular. The company completed the foundation necessary to deliver Wireless Charging 2.0, which is the ability to charge devices at contact and at-a-distance with mobility while supporting a wide range of power requirements.
WATT was able to achieve consistent progress for mass production and cost-effective chipsets that are the basis for its wireless charging technology. The company received and shipped through its partner, Dialogue, filling its first commercial orders. This signals a transition for WATT from being in a developmental stage to a commercialized company in less than three and a half years, dating back to the IPO and formal launch of the company in 2014.
Although revenue remains nominal and fell below certain threshold requirements in its Dialogue agreement, its chipsets were purchased for use in manufacturing pre-production rollouts. This will translate into significant revenue in coming quarters as its partners begin full production. Management had this to say about its new and innovative technology launches:
"Energous expanded the power envelope of the WattUp technology with the introduction of our high-powered silicon. These chips, based on leading GaN and GaAs technology, are capable of delivering up to 10 watts of contact-based power for fast-charging electronic devices, such as smartphones, tablets, game controllers, drones and more."
In recent quarters, WATT completed its partnership integration with Dialogue. This relationship is being enthusiastically embraced by Dialogue and WATT, as both companies are reaping significant benefits, according to management.
The partnership has the potential to bring credible validation of WATT's vision and technological innovations. It solves WATT's supply chain problem, as it provides a vehicle for WattUp silicon chips to be inserted into an existing reliable supply chain. Management had this to say about its supply chain:
"For the world's largest consumer and IoT companies, supply chain is as important as the technology, when you are considering enter - inserting third-party chips into your devices. The partnership has also accelerated Energous' customer acquisition by aligning us with a very experienced and well-connected salesforce."
Finally, the partnership allows WATT to forego the significant ongoing cost to fund a large operations team and a global sales organization as well as the cost of caring and managing a large silicon inventory.
WATT continues to increase its first-to-market advantage and increase its barriers to competition with the expansion of its IP portfolio. WATT began 2017 with 18 patents. By the end of the year, they had secured 104 granted and allowed patents.
The company works in an innovative technological space, where creating the supply similarly creates demand. Wireless charging and connectivity is a needed product, and WATT's first-to-market advantage is giving it a leg-up on potential competitors. Moreover, the company continues to generate new and valuable patents, which should lead to strong revenue growth in time.
Investors will likely bid WATT's share price higher on its potential, with significant growth coming when the company begins to show top-line results.
Conclusion
WATT is breaking out higher following very optimistic guidance by management. The company is an early-stage wireless charging company that is rapidly increasing its IP. Moreover, the company recently went from its developmental stage to a commercialized company. Its share price reflects this by recently breaking out higher on strong results. I am buying stock in this prior to a potentially strong move higher in coming years while keeping my eye on near-term stop-loss levels should optimism reverse.
Disclosure: I am/we are long WATT.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
