Valuation Our $2.25 price target is based on ~3.0x FY17 revenue, which we believe is appropriate for an IoT/mobile payments pure play growing in the 20%+ range, plus estimated patent value and net cash.
Upside:
If order activity accelerates and deal sizes are increased because of demand for NFC, OTIV could receive a higher multiple on higher revenue. If OTIV adds telemeter sales to the reader, ASP could increase. Success at trial could also add to imputed corporate value. Stock could reach $5-$6 range then.
Downside:
Vending operators are slow to adopt new technologies, pushing out material growth to FY18 and beyond. New channels don't materialize. Stock trades to $0.50 level then. Risks to the achievement of price target In addition to competition, we see the following risks to investors in OTIV:
Managing growth.
OTI is a relatively lean organization, and expected high growth can stress organizations. The company must be able to execute well under this scenario.
Customer concentration.
Since a substantial portion of OTI’s revenue comes from large projects, the company is often dependent on a few large customers. If OTI fails to successfully diversify its business and replace one large project with another, financial results could be adversely affected in a material way.
IP monetization.
Patent monetization strategies are inherently risky given the subjectivity often at play during the legal process.
Foreign exchange.
Any changes in the value of the U.S. dollar against those currencies could materially impact OTI’s operating results.
Vending Industry.
Many of OTI's sales are into the vending industry, which is often slow to adopt new technology and has thin margins. |
Thread abonnieren
