On Track Innovations – A Micro-Cap FinTech Play with Great Upside
The speculative trading in anything to do with Bitcoin or one of the other many cryptocurrencies has been incredible. Bitcoin traded at $19,666 on December 17 but plummeted down to $15,670 as I am writing this. Considering that Bitcoin was trading at $751.00 at the start of the year and at $13.00 in 2013, the gains have been staggering.
But while I’m not convinced about the valuation of Bitcoin or other cryptocurrencies, I do understand the incredible potential for the blockchain technology to spread to many industries, from banking to supply chain and manufacturing.
A small and largely unknown micro-cap Israeli company that I have been following for a few years, On Track Innovations Ltd (NASDAQ:OTIV), made headlines last week after the stock surged 185% from the close of $1.03 on December 15 to a high of $2.94 on December 19.
The rocket-like price action in OTIV stock was triggered by news that the developer of cashless technology solutions was looking at developing capabilities to use Bitcoin in its solution.
Now call this an obvious opportunity by On Track Innovations management to take advantage of the Bitcoin frenzy, knowing the stock price needed a lift, but the reality is that OTIV has good cashless technologies and is growing its revenues.
Why OTIV Stock Is Intriguing Despite Bitcoin Hype
Was the spike of OTIV stock to $2.94 justified? Not in my view, at this time. Having said that, is Bitcoin worth what it is trading at?
Take a look at the trading volume for On Track Innovations stock. OTIV stock traded 52.86 million shares on December 18 followed by 42.81 million shares on December 19. The volume steadily declined to 9.61 million on December 20 and is tracking lower along with the OTIV stock price. Consider the three-month average was 1.78 million.
Once the volume behind OTIV buyers dries up and traders take the gains, I would expect On Track Innovations stock to retrench towards its previous sideways channel between $1.00 and $1.30 or as high as $1.60.
Once you ignore the Bitcoin hype, you’d realize On Track Innovations actually has decent technologies in near field communication (NFC), mobile payment solutions, and cashless payment. It has the potential for steady share price appreciation.
As On Track Innovations looks to expand its cashless and mobile payment business, as well as the potential inclusion of Bitcoin transactions, annual revenues are treading around the $20.0-million level since 2013.
There is some optimism, as the consensus estimate calls for On Track Innovations to ramp up revenues by 25% to $26.5 million and as high as $29.0 million by 2018. (Source: “On Track Innovations Ltd. (OTIV),” Yahoo! Finance, last accessed December 21, 2017.)
On Track Innovations has managed to narrow its losses and could turn a profit of $0.05 per diluted share in 2018.
The spike last week was clearly not sustainable or justified but I’m bullish on the prospects of OTIV stock going forward.
The longer-term weekly chart of OTIV stock shows the price at above $4.00 in January 2014 prior to trading at $5.00 in September 2014.
Chart courtesy of StockCharts.com
We all know what followed thereafter as On Track Innovations stock broke to a narrow sideways channel at below the 50-day and 200-day moving averages since October.
Japanese candlesticks have turned bearish. We could see OTIV stock retrench towards the previous channel at $1.20 to $1.30 and $1.60.
For traders, a dip back to the previous levels prior to the Bitcoin-infused hype would be an opportunity to accumulate shares of On Track Innovations stock.