Vuzix 4Q19 results and much more -3

12:39 17-Mar-20

The CEO of Vuzix purchased 5000 shares on the open market yesterday at 97 cents each.  The company issues so many shares to its employees that this represents less than a fifth a percentage point increase in his total share count, which represents 7.85% of the company, at least until it dilutes again.  Nonetheless, VUZI has currently rebounded along with the rest of the market to $1.07.

EMAN looks even worse, trading at 19 cents after a Director bought 31.5K shares at that price yesterday.

Companies with better credit can now borrow at 2% for at least the next year, according to the Fed's latest move.

The bankruptcy court has approved PG&E's $23b financing package after California's governor dropped opposition to the deal.  Clearway shares held up quite well before the obviously forced sales today and last Thursday.  A return to prior valuation now offers over 30% profit, but that not even half of what's available from may other tickers with at least as much yield.  Still, this event makes that recovery one of the surest.  The real question is likely to be whether one wants distinctly American or foreign investments as U.S. influence continues to erode, and the euro has normalized around $1.12.  I see every reason to expect that the rest of the world will have a sharper but shorter financial reaction to COVID-19.

On 3/16/20 3:19 PM, Esekla wrote:

Vuzix has reported its fourth quarter results:

• a loss of 31 cents per share misses by 16 cents
• from $1.9M in revenue, which misses by $500K

The big EPS miss is due to a reserve of $4.6M for obsolescent inventory.  M-300s were written down to zero; so it won't get worse and there could be some recovery.  However, the company also burned through almost $10M for the quarter, meaning it will have to raise capital in the first half.  That will be difficult in the current market, where VUZI shares are trading just below $1.  If they stay there, the stock will be subject to Nasdaq compliance issues and the eventual reverse split.

That said, the current quarter looks like a kitchen sink quarter.  Management reports over 85% waveguide yield, with production successfully transitioned to the U.S.  Some parts are still sourced from China, but the impact is characterized as minor.  I note that U.S. production could still be impacted in the same way that China would have been, which could impact product introductions which were expected this year, such as Sword.  Still, applications from videoconferencing to security & medical screening should be seeing a boon.  Some are already predicting that all large displays to go the way of the CRTs, in favor of microdisplays and voice controls.

I would continue to stay away from VUZI until it recapitalizes.  The company is planning new versions of its devices, which indicates that costs could remain high.  On the other hand, management says that development contract revenue for this year could rival product revenue in the second half.  However, it's not clear than any company-specific news matters at all in the current market environment.  Here's the rest of it:

As expected, Golar has signed a Protocol of Intentions with Pernambuco. Brazil to develop an LNG import terminal in the Port of Suape.  Brent has touched new multi-year lows below $30, with WTI only about $1 behind, but natural gas is still above $1.80.  Golar is one energy position that might be taken on by the very brave in this market, as it has less exposure than, say, Shell or Schlumberger.

Westport has suspended production in Brescia, Italy, and will reassess the decision in two weeks.  I've already spoken about the unfortunate segment exposure for WPRT, though there are signs of stablization and recovery in China.

An AES Director initiated a new position by buying 10K shares on the open market at $12.99 on Friday.  It has traded between $11.50 and $12.50 today.

Last, and probably least for now, Resonant has formed an Advisory Board.  I continue to be very interested in the technology, but wonder about any expense associated with this group.  The most powerful argument for the stock at the moment is the 5% net rebate rate.

In conclusion, I stand by my expectation that the market, excluding energy, will rebound after this week.  After another wave of forced sales this morning, my best guess, and it is only that, would be for a lower limit of  2,250 on the S&P index, which means still as much as 10% further downside.  Invest carefully.