Kopin Stock: Small Wearable Tech Stock Down 65%; Time to Take a Look

Man touching the futuristic blue screen

Kopin Corporation Operates in $74-Billion Market

The wearable technology market was approximately $27.9 billion in 2020 and is estimated to surge to $74.0 billion by 2026. (Source: “Wearable Technology Market – Growth, Trends, COVID-19 Impact, and Forecasts (2021 – 2026),” Mordor Intelligence, last accessed October 15, 2021.)

That’s huge, and investors can play the sector through Kopin Corporation (NASDAQ:KOPN), a developer of critical components in consumer and military wearable technologies.

While the potential is massive, Kopin stock has been subject to torrid selling. Its share price is down by 65% from its February high. Despite this, KOPN stock is up by 246% over the last year after trading at $1.17 in November 2020. Prior to this, Kopin stock traded as low as $0.19.

Shares of Kopin Corporation aren’t advised for risk-averse investors, but for those who can stomach volatility, the payoff could be huge, given the scale of the recent selling.

Advertisement

KOPN Stock Could be Heading for Another Sale

A look at the below Kopin stock chart shows an aggressive risk/reward opportunity, but there could be more selling to come before any rally.

KOPN stock is currently in a bearish descending triangle pattern and recently entered a death cross, which is a bearish crossover pattern that appears when the 50-day moving average breaks below the 200-day moving average.

Kopin stock is threatening to break support and fall toward $3.00.

As far as the upside goes, the initial technical targets for KOPN stock are the 50-day and 200-day moving averages, followed by key resistance at $9.00, $12.00, and $14.00.

Chart courtesy of StockCharts.com

Improving Fundamentals Support Bull Case

Kopin Corporation’s five-year revenue picture shows a near-doubling from 2016 to 2020, including double-digit growth in three of the past four years. Even amid the pandemic, the company increased its revenues by 35.9% in 2020.

Kopin’s revenue compound annual growth rate (CAGR) was 15.4% from 2017 to 2020.

Fiscal YearRevenues (Millions)Growth
2016$22.6N/A
2017$27.822.9%
2018$24.5-12.1%
2019$29.520.7%
2020$40.135.9%

(Source: “Kopin Corporation,” MarketWatch, last accessed October 15, 2021.)

Kopin is expected to report a decline in its revenue growth rate to 10.0% (to $44.1 million) this year and then a rise to 15.2% (to $50.9 million) in 2022. (Source: “Kopin Corporation (KOPN),” Yahoo! Finance, last accessed October 15, 2021.)

The company could deliver higher revenue growth if it can take advantage of the wearable technology market.

Kopin Corporation’s earnings before interest, taxes, depreciation, and amortization (EBITDA) have been negative, but the situation has been improving. The company’s EBITDA loss came in at a five-year best in 2020.

Fiscal YearEBITDA (Millions)Growth
2016-$27.2N/A
2017-$27.00.7%
2018-$34.1-26.2%
2019-$25.325.9%
2020-$4.183.7%

(Source: MarketWatch, op. cit.)

Kopin Corporation’s generally accepted accounting principles (GAAP) and adjusted earnings per share (EPS) have also been negative, but the situation has been improving for that as well.

The company narrowed its GAAP EPS loss in 2019 and 2020 by a better rate than the comparative revenue growth. This signals strong expense control.

Fiscal YearGAAP Diluted EPSGrowth
2016-$0.37N/A
2017-$0.362.4%
2018-$0.47-30.8%
2019-$0.3722.1%
2020-$0.0585.4%

(Source: MarketWatch, op. cit.)

Adjusting for non-recurring expenses, analysts estimate that Kopin Corporation will report a loss of $0.13 per diluted share this year, followed by a loss of $0.11 diluted share in 2022. (Source: Yahoo! Finance, op. cit.)

The company has been reporting negative free cash flow (FCF), but it reported its best showing in five years in 2020. Kopin’s FCF could turn positive this year.

Fiscal YearFCF (Millions)Growth
2016-$26.6N/A
2017-$28.7-8,1%
2018-$29.3-2.0%
2019-$21.227.6%
2020-$4.976.6%

(Source: MarketWatch, op. cit.)

In the meantime, Kopin Corporation had significant working capital, minimal debt of $1.3 million, and cash of $30.8 million as of the end of June. This will give the company time to execute its business strategy without fear of a cash drain. (Source: Yahoo! Finance, op. cit.)

Analyst Take

Institutional investors have been jumping on board Kopin stock following its addition to the Russell 2000 Index in June.

About 131 institutions hold 27.2% of the outstanding shares of KOPN stock, and I expect this percentage to rise if the company delivers improved fundamentals. (Source: Yahoo! Finance, op. cit.)

The bottom line is that the strong tailwinds in the wearable technology space provide an opportunity for Kopin Corporation and its shareholders.