Energous Corp Is a High-Risk, High-Reward Micro-Cap
While the micro-cap technology segment entails high risk, it’s also an area where you can find high prospects. You shouldn’t bet your retirement savings on this segment, but if you have what I refer to as “risk capital,” there are opportunities.
An intriguing example of a micro-cap early-stage technology stock is Energous Corp (NASDAQ:WATT). It’s a high-risk, high-reward stock that traded as high as $33.50 in December 2017 prior to sinking to the current $10.00 level.
WATT stock plummeted to $4.41 during the selling carnage in December 2018, but it has rallied by more than 100% since that sell-off.
The following chart shows Energous stock looking to break out from its current level and move toward the $15.00 and $20.00 levels.
Chart courtesy of StockCharts.com
To say that Energous is not speculative is an understatement, but there is bullish potential for WATT stock.
The stock surged in late 2017 on market enthusiasm about the potential of the company’s innovative wire-free charging technology called “WattUp.” The technology allows electronic devices to charge via proprietary wireless radio frequency technology.
Think about what the technology could mean. You don’t have to find an outlet to charge your device.
The key for Energous will be to continue to refine its technologies and ramp up its revenue via sales of its own products and licensing of its technology. If the company can achieve this, I would expect a corresponding rise in the price of WATT stock.
My Bullish Argument for WATT Stock
A glance at the last three years shows minimal revenue, but the forward expectations are optimistic as Energous increases its sales.
(Source: “Energous Corporation,” MarketWatch, last accessed February 21, 2019.)
Revenue is expected to be reported as almost $1.4 million for 2018, but is anticipated to surge to $42.5 million in 2019. (Source: “Energous Corporation (WATT),” Yahoo! Finance, last accessed February 21, 2019.)
The expected revenue increase may be somewhat optimistic, and it is dependent on whether the company can drive its sales at this scale.
My view is that Energous Corp doesn’t need to deliver the 2019 revenue target, but the company should show both strong growth and evidence that its charging technology is being adapted.
At the same time, Energous is narrowing its loss, and the hope is that the higher revenue will result in a move toward positive cash flow.
|Fiscal Year||Diluted Earnings Per Share|
(Source: MarketWatch, op cit.)
Energous Corp is estimated to record a loss of $1.92 per diluted share for 2018 and $0.36 per diluted share for 2019. (Source: Yahoo! Finance, op cit.)
While Energous is nowhere near being profitable or cash-flow-positive, the company has strong working capital, $28.6 million in cash, and no debt.
A positive sign is the heavy buying by insiders. During the last six months, insiders bought 577,349 shares and sold only 54,577 shares. (Source: Ibid.)
The stock market has been betting against WATT stock, especially with the recent doubling in price. As of January 30, there was a heavy short position of almost 7.7 million shares, or 33.5% of the float. That could lead to a short covering in Energous stock if the company can deliver positive news.
There is no guarantee that Energous Corp can deliver, so the element of risk is extremely high. But success could translate into spectacular gains for WATT investors.