Vuzix Corp: Down More Than 50% But This VR Play Can Double

Vuzix Corp (NASDAQ:VUZI): Down Over 50% But VR Play Can Double
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Vuzix Corp Is a Speculative Play on Augmented Reality

There’s a pretty good chance you are familiar with the concept of augmented reality (AR), which was supposed to change the way we view images.

AR has yet to take off in a big way, but if it does, Vuzix Corp (NASDAQ:VUZI) could reward investors with significant gains.

Vuzix went from developing display technologies for the defense sector to producing virtual reality (VR) smart glasses and products for the consumer market.

The idea behind VR and AR technologies is that they allow users to experience real objects or visuals as if they were there.

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For instance, you can use VR to shop for goods from the comfort of your home. Instead of only seeing 2D images, you can view products in the much better 3D.

Using VR and 5G technologies, doctors can perform surgeries from anywhere. And if you want to go on vacation but don’t have the time or funds, you can employ VR to experience what the trip would feel like.

VUZI stock traded at a record $22.50 in August 2010 and as high as $6.59 in November 2018. But struggles with VR growth killed the euphoria.

The below chart shows Vuzix stock breaking out in early September from a sideways channel and currently looking for another breakout from the current channel.

Chart courtesy of StockCharts.com

A rally to resistance at $3.50 would be a move of nearly 50%.

Why VUZI Stock Could be Worth a Look 

The revenue picture shows the small scale of Vuzix Corp’s growth. The lack of stronger revenues has capped the upside moves in Vuzix stock.

Fiscal Year Revenues (Millions) Growth
2014 $3.0
2015 $2.8 -9.3%
2016 $2.1 -22.6%
2017 $5.5 160.3%
2018 $8.1 46.2%

(Source: “Vuzix Corp.MarketWatch, last accessed October 25, 2019.)

But we are seeing some hope. Vuzix is estimated to continue its two-year revenue growth over the next two fiscal years.

The company is predicted to increase its revenues by 18% to $9.6 million this year, followed by a 112.3% jump to $20.3 million in 2020. (Source: “Vuzix Corporation (VUZI),” Yahoo! Finance, last accessed October 25, 2019.)

Earnings before interest, taxes, depreciation, and amortization (EBITDA) and free cash flow have been negative, and Vuzix has been burning through cash. This is what you would expect as a company like this looks to grow.

The following table shows Vuzix’s generally accepted accounting principles (GAAP) diluted earnings-per-share (EPS) figures for the past five years.

Fiscal Year GAAP Diluted EPS Growth
2014 -$0.75
2015 -$0.97 -29.3%
2016 -$1.23 -26.8%
2017 -$1.02 17.1%
2018 -$0.87 14.5%

(Source: MarketWatch, op. cit.)

The important thing is that VUZI reported lower EPS losses in 2017 and 2018, and that the narrowing of these losses is expected to continue.

By 2020, Vuzix could see its loss fall to $0.48 per diluted share. Profitability is still years away, but as long as revenues grow and there is a pathway to profits, VUZI stock should rally higher. (Source: Yahoo! Finance, op. cit.)

Analyst Take

Insiders bought shares of Vuzix Corp to the tune of 90,400 shares over the past six months. (Source: Yahoo! Finance, op. cit.)

Vuzix stock offers speculators an aggressive opportunity to accumulate positions at the distressed levels and hope for a bounce.

VUZI stock might be only for traders with a higher risk threshold. While its price could decline, positive news could lift this stock to much higher levels.