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Resonant introduces 5G filter and more +3

09:21 09-Oct-18


Resonant reports that it will discuss a breakthrough in cost-effective 5G filter design on October 24th, at the IEEE International Ultrasonics Symposium in Kobe, Japan.  A paper with additional details will be made available on October 23rd.  For now, the press release says that the breakthrough is a "fundamentally novel" resonating structure that outperforms best-in-class FBAR resonators in simulations.  The company filed patent applications on the technology earlier this year.

RESN is up 7% in the pre-market.  I do see this as fundamentally positive and note that spectrum range in question constituted Vodafone's largest purchases in the recent Italian auction, and should be used for the highest bandwidth services.  However, the market looks set for more volatility today, being caught between $/€ strength/weakness due Italian budget concerns, which are hurting VOD.  I still don't see this as the start of an extended bear market, but the correction could easily last through next week as institutions use options to hedge for the midterms, which of course could change my outlook.  To wit, there have been quite a few questions on the topic of recent RESN pricing, which I see as related to the CFO resignation, despite the timing.  To quote some of the correspondences:

There is no new news that I can see.  The volume is multiples of the recent averages, but to me it just looks like herd mentality.  People don't get afraid until the price actually starts dropping, and although there was some volume on the day the CFO resignation came out, markets were steady then.  Now they've turned negative again.
I should probably add, however, that no news is bad news in this case.  They'd just done a talent search, if the problem was with the candidate they selected, then the next one shouldn't be that hard to come by.  It's only been about two weeks, though.
The same goes for CTL, in that the longer it takes CenturyLink to name a replacement, the less it looks like a planned departure.  The difference is that, with Resonant, there is much more legitimate fear of accounting irregularities that could cause no end of trouble, including but not limited to restatement of past results.  This is a little more concerning in light of Resonant management's history with Superconductor Technologies and the growing lack of accountability in America.  By contrast, I have more confidence that CenturyLink will move forward without material impact. 

Delayed reactions like this aren't uncommon with thinly traded stocks.  ERII is and could continue to suffer from such a dynamic.  Unlike ERII, I see CVA as somewhat undervalued and involved markets with current tailwinds like energy and metals.  Just the same, its shareholders should feel lucky that the market has no reaction to the $50M impairment charge so far.  Although I see that as correct, it's unclear whether the lack of response is a matter of analysis or inattention.  Investors should always strive to be positioned to ride out, and even benefit from short-term volatility.  Of course, dividends like those from CTL, VOD and CVA are the best defense.  Growth and technology of the sort that Resonant has featured are the next best thing, but the CFO and market situations are making the risk an reward prospects even more highly bifurcated.