GRoDT 3Q22 results and commentary on the week ?4

08:30 11-Nov-22

Polestar has published results for its third quarter:

• I calculate a loss of 9 cents per share from operating loss of $196M, beating by 5 cents
• from $435M of revenue misses by $241.9M
• projects $2.4b FY22 revenue which implies $923M 4Q22 sales

I was able to get analyst estimates from an alternate source just last night.  Polestar also provides more detail on the loan from Volvo; it can draw $150M per month and the rate is 4.97% above 6-month SOFR which currently equates to 9.59%.  While that's better than the terms that Dish got, it's not great.  Furthermore, South Carolina is the company's only American manufacturing and management is unable to comment on when it will regain American tax credits.  PSNY is initially up over 20% above $5.50 in the pre-market, but it's clear to me that the company is about 2 years away from benefiting from its superior product.  Costs will increase going forward, further eating into the bottom line.  Thus, although I continue to like the asset light model, I will be using the rise to hedge or exit my small position despite the 20%+ rebate rate.  I will continue listening to the conference call where plenty of analysts are participating, but sounding generally skeptical.  I will write more if appropriate.

eMagin also reported results for its third quarter yesterday:

• almost broke even with a low sub-penny EPS loss
• from $7.6M of revenue
• sold $1.5M of stock via the ATM program

I note that the company got a bump from the sale of product that was previously written off because of a quality issue that was resolved.  Without that, ongoing sales were marginally below any other quarter for the past year.  EMAN topped out at $1.04 in yesterday's rally but failed to hold the critical $1 level for Nasdaq compliance, closing at 94 cents. 

I document all this because we may see speculation that the turnaround is here.  I'm not ruling that out eventually, since the company achieved production certifications and will take delivery of an upgraded deposition chamber next month, which the company will use to produce next-gen samples for military and commercial customers.  However, the delivery is 3 months late, and will only bring eMagin past the half way mark on new equipment installations.  Increased production is targeted for 2H23.  Management was able to provide no detail on product licensing or CHIPS+ applications during the call.  Furthermore, I think the recovered product sales are an indicator of what a low bar there has been for corporate operations.

Speaking of suspect turnarounds, my Ebix analysis obviously should have noted the 25.5% of shorted float at the end of last month, which is at least a 1-year high.  Yesterday trade volume was almost 7x the recent daily average, and EBIX topped out above $30, around double its pre-market low.  At 24 days to cover, investors should continue to expect a while ride, and while the CPI print was positive for developing economies and the stock, my fundamental stance is unchanged.

The risk on macro environment is being enhanced by evidence that China may be starting to see reality on its COVID policy and the euro has reached $1.03 in response.  However, I am not at all convinced that crypto contagion and risk is finished even though bitcoin has extended its recovery above $17.4K.  I note that the Nevada Senate race is now leaning Democrat, increasing the chances of retaining the incumbent status quo there, though I reiterate that there will certainly not be clarity until after the results of the Georgia runoff on December 6th are known.