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Resonant design win is with Samsung? +4

16:19 25-Jul-17


An article on Seeking Alpha is reporting that Resonant's design win is with Samsung.  The basis of the analysis is comparison of photos from an ABI tear-down with some of Resonant's patent filings.  At this point, I can only confirm that ABI research did do a tear-down.  That said, my take is that the part identification is credible and a very good catch if correct, but that is not 100% certain.

A design win with Samsung should be transformative, as a successful commercial product with no issues would likely be a gateway to MUCH broader business.  So far so good, but I've listened to the author on several calls, and am inclined to take analysis from this source with salt.  In particular I would disregard the comparison to Akoustis in favor of the following financial analysis:


 TAM
  x Design to Product
  x Royalty
  x Market Share
  = Revenue
Base Case
 $290M
 50%
 7%
 11%
 $1M
Best Case
 $290M
 80%
 12%
 65%
 $18M

The market share guesses come from market share estimates made by IDC at the beginning of the year.  The royalty and design to product figures are from Resonant's Virtual Road Show, which had already confirmed a commercial design win and included the following quote:

In Q2 we contracted for tear down on a number of devices and can at this time verify that our technology has been designed into and OEM handset that is generally available on the market. It is an early design win in a niche market phone that will contribute to the modest royalty stream that I can also verify has begun this quarter.

So, the only new info here is possible confirmation of the model and maker.  I would put immediate revenue below even the Base Case, and even with those figures the company is nowhere near being profitable and RESN is still not worth any more than $5.  However, the win being with the world's leading phone supplier is still a major step that is sure to reverberate through the industry, though it does not completely alleviate my concerns about working through Chinese intermediaries.  Even so, in the Best Case, we could expect Resonant to turn a profit somewhere in the neighborhood of 50 cents per share, which would imply a $10 stock price. 

Of course, the worst case is that there is some problem with the part once the phone sees broader usage.  I don't think that's likely, but it highlights that Resonant is still in GRoDT territory even supposing that the part identification is correct. Resonant should report again early next month, and we may get more definitive info then.  In the meantime, I'm hoping the almost 5% rebate rate will help the stock hold the $5 level that I've cited all along as a new base, but I'm still not willing to chase it much above that.