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AKTS and other trading thoughts ?4

08:25 17-Aug-23

Akoustis has begun sampling the new filters linked below to its Tier 1 customer for use in WiFi 7 routers in the first half of next year.  Since this was expected and the customer is probably Comcast, I don't expect the press release to have a big or sustained effect on AKTS trading.  It should be a good proof point, though, and every little bit helps.

There is also a trio of OMIBs to report:

Symbol	Shares	Price	Date	Position
MX	10,888	$8.36	8/14	CEO
CWEN	4,000	$23.68	8/14	CEO
AES	27,400	$18.27	8/16	Director

All of these stocks have been on the decline, but I don't find any of the price points particularly compelling yet, even though we look set for a bounce today, thanks largely to Walmart.  This is just what the market has been looking for since most of the buying of late still seems to be zombie capital going into large caps.  On the other hand, we have further cost cutting at Google.  I'm eagerly watching for the monthly market leverage data, which should be out any day now.

One more update, to backtrack a bit on my AMSC statement below.  The reason is that I've just noticed that weekly options through September have been introduced on the stock.  That is likely to smooth volatility a bit, while they last, but volume doesn't seem to support them being a permanent feature.

The market reaction in INTC has been muted so far, but I think the slide will be sustained as analysts slowly realize that Intel is now in a bind with regard to the mature node customization that its CEO promised when the deal was announced.  As I alluded back then, it just doesn't pay to build new fabs for older technology, yet that's exactly where we've seen bottlenecks, driven by demand from automakers and renewables.  Without a full range of offerings, Intel will really struggle to attract the volume it needs to compete at scale.

Fed minutes are up next, but I will probably ignore them unless the market reacts inappropriately by failing to do the same.

On 8/16/23 08:15, Esekla wrote:

Intel's acquisition of Tower Semi is now officially terminated, as I anticipated.  Intel's management let the clock run until the last possible moment, before conceding the $353M termination fee.  That's insignificant, but the vaguely positive quotes from the CEO and IFS GM belie what a blow this is to Intel's Foundry Services aspirations.  Just hours ago, major news outlets were still publicly wondering whether or not there would be another extension.  Whether the market acknowledges it or not, Tower was needed both for leadership and to fill capacity.  Consequently, I still think INTC is worth less than half the prices it has recently traded at.

Also, I suppose I should document LK-99 being debunked, even though that was always my assertion.  This sets AMSC up for potentially interesting trading following options expiration.

On 8/15/23 09:37, Esekla wrote:

It's all corporate trivia today, starting with Intel bringing more software support on board for its foundry services.  The reality is that those are backsliding, though, as Qualcomm discontinues development for Intel's 20a process, following poor earnings.  Looking forward, Intel will also plug its AI efforts again next week, but I think investors should be more concerned with the here and now; today is the Tower Semi deadline.

I could get more excited about Lumen leveraging its edge network for smart city customers, but there are no real details provided.  My guess would be that this essentially just documents forward thinking customers for its NaaS initiative.

Finally, I'll document MariaDB's fiscal third quarter results of -0.14 cents from $13M of revenue, even though no analysts cover the company.  Despite the loss, I note the company increased cash on the balance sheet as it cuts costs.  I find it refreshing to see a business that is just achieving steady growth, rather than courting the market, but that doesn't make for an investment case, especially in the face of an eventual reverse split.

On 8/14/23 11:39, Esekla wrote:

I've been getting questions about AKTS trading below $2.  I think much of the weakness is due to comments at the end of the latest presentation, which affirms to difficulty in getting government funding that I've warned about all along.  Management said it is negotiating with Commerce Department on CHIPS act terms.  As currently structured those would only defray around 15% of construction costs.  Akoustis had hoped for a second building to house a new production line, and a third, smaller packaging building, but the cost for an unprofitable company would be prohibitive sans better government assistance.  Without the new buildings, the company could still increase capacity of existing facilities to 1-2b units annually using existing facilities, though.

All of this is just detail on the horrible environment for GRoDTs that I've been documenting for some time now.  Though I remain unwilling to take chances on Washington making its funding actually be helpful, I do think that the single crystal material introduced at the end of July put Akoustis a more advantageous technological position than ever before.  The technology allows for higher power, which makes it particularly applicable for satellite communications and base stations.  Per the MACom call, which I had already referenced as negative for Akoustis, those are areas of high interest, but also long lead times.  Consequently, AKTS now joins AMSC as a company that will need M&A to realize its full potential in the short term.  I further think that AKTS is currently the better value, and management being closed-lipped about engagements on its new filters may be indicative of acquisition talks.  We'll see if that behavior continues at the next quarterly report, due in early September, and I would view delayed scheduling as slightly positive.

Without M&A it's going to be a tough slog due to the latest round of news that a Chinese company is successfully mass producing BAW filters.  There have rumors of this for at least a month, and I can not speak to their veracity.  The focus has been on Huawei re-entering the 5G phone market, which Akoustis certainly does NOT currently serve.  If true though, it's possible that would bleed out to other applications, and would hard to say how much this could impact Akoustis.  The company has more than half its sales in Asia, but does not break out by country.  So any AKTS position will require lots of patience and nerve, just as AMSC has.

I've also had discussion with readers about the 50%+ drop in EBIX, and I concede that the repricing that I've long warned about could finally wind up being a value.  Despite that, I'm still personally unwilling to take chances in the current financing environment without hard terms on some deal.  For the rest of us, I still prefer my natural gas picks, which may get a bump if Australian LNG workers go on strike.  That should affect JKM more than TTF or Henry Hub, but the LNG market is becoming more global and I continue to think that natural gas is the bridge fuel we can't do without over the coming years.

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