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Akoustis 2Q23 results +3

09:15 07-Feb-23

The Akoustis conference call has just concluded.  AKTS was up 4% to trade around 4.65 as the prepared remarks proceeded.  However, that already began showing slight deterioration through the Q&A.  From what I can see, this stock is all about the story, which is typically great for the short term and less so for the long term.

I also think the market is currently glossing over the details of the story.  Management plans to apply for CHIPS+ funding "shortly", but the application process is still not even published.  That is probably why MACom downplayed the short term effect and Intel is preparing a debt offering that is likely to massive.  No numbers were provided by Akoustis management, but it says it plans to request a multiple of the company's current market cap, which had risen to about $320M as of yesterday's close.

The market is already edgy ahead of Powell's interview at 12:40.  However, tonight's State of the Union speech at 9pm is a nothing-burger.  While I would love to see a quadrupling of the tax on stock buybacks, and wouldn't mind billionaires paying a minimum 20% tax, none of it is likely to happen with Republicans controlling the house.  What will really matter is the CPI report a week from now.

In conclusion, I reiterate that guidance is particularly underwhelming given that it includes the GDSI acquisition.  I think current prices make sense if and only if everything goes right over the coming year, which would mean increasing to around 20 customers from the 15 current ones, and bringing the company to cash flow breakeven next year.  Progress in base stations will be particularly important in that effort, yet MACom management had forecast weakness in that segment.  I like that new BAW filter parts are now becoming die compatible with competitors, but I'm almost never willing to gamble on the timing of politics.  Furthermore, my experience is that mass manufacturing is harder than sampling.  Consequently, I will be content to miss out if everything goes right in both the real world and the market.  For the record, the same goes for AMSC and its 20% gain yesterday.

Akoustis has reported results for its fiscal second quarter:

• a loss of 19 cents per share beats by 6 cents
  
• from $5.9M of revenue, which is in line.
• Guides 3Q23 to $7.7+/-0.6M of revenue, which misses by $0.2M.

AKTS has traded in the pre-market yet, but I think the market will like the bottom line beat more than the weak guidance.  I am less impressed with it since it's easy to beat on per share numbers when you have a constantly expanding share count; I note that shareholders experienced about 10% dilution during the quarter for this report and the recent 20% dilution hasn't even shown up yet in the figures.  Counting that, the company should have about $75M in cash now, but the higher the stock price runs, the more temptation there will be to do it again.

That said, management continues to predict good results from a CHIPS+ application, which could easily allow the company to grow into its valuation.  Still, even with everything appearing to be on track, I am staying away at these prices.  The conference call is at 8am, and I may or might not write more depending on what I hear.

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