Our section “Super growth” features companies that are future ten baggers. One such company we are closely following is Energous Corporation (WATT), trading on the Nasdaq. It is a nano cap with a market cap of less than $200M. The company is developing WattUp, an award-winning wire-free charging technology that has the potential transform the way people charge and power their electronic devices at home, in the office, in the car and beyond. WattUp is a patent-pending solution that delivers scalable power via the same radio bands as a Wi-Fi router. WattUp differs from current wireless charging systems in that it will deliver usable power at a distance to multiple devices, resulting in a wire-free experience so that users do not have to plug in their devices.
Lately, WATT has gone seen a huge rally, where the company has almost tripled in a time span of 3 months. Interestingly, volume has exploded as price was rallying. That is a sign of accumulation, and that is exactly what we like to see.
WATT has bumped into heavy resistance this week, and a mini-collapse took place on Monday and Tuesday. However, given the price and volume pattern in 2016, we believe large and smart investors are accumulating shares of this company, and the sell off was more of a technical issue as prices bumped into all-time highs.
Now what makes us extremely enthusiastic is the unexplored potential of wireless charging, combined with the strong prospects of WATT to generate revenues. Consider the following from the company’s Q1 conference call:
We remain comfortable with our forecast of closing 10 to 12 definitive licensing and joint development agreements in 2016. The pace and ultimate number of new licensees is directly related to our ability to grow our customer support and engineering functions. To this end, the CES show was exceedingly successful.
With a successful CES show as a backdrop , in the first quarter of this year we continue to accelerate the pace of engagement with potential licensees. In Q1 we signed 10 evaluation agreements and delivered evaluation kits in conjunction with each of these agreements to a broad spectrum of potential partners in the wearable, toy, battery, computer accessory, smart jewelry, IoT , and Wi -Fi router markets. Of the 10 evaluation agreements , two were c onverted to full licensing agreements last quarter , and we expect this pace to continue with at least three new licensing agreements executed in the current quarter.
The relationship with our tier – 1 strategic partner also remains on track. In the first quarter we signed our third addendum to our original agreement, which brings benefits to both companies and provides greater details on the milestones that form the core of our relationship. Based on milestone achievements , we were able to invoice and collect $500,000 of engineering services revenue in the quarter, but were only able to recognize approximately $136,000 because of revenue recognition accounting rules. We anticipate additional invoicing and revenue this year as we continue to deliver on mile stones.
The above information should be read in the context of the following data: $2.5M revenue in 2015, $27.5M loss in 2015, $29.8M cash at the end of 2015. So the company is running out of cash, and is still investing in engineering, as discussed in their Q1 conf call. However, the expectation is that the R&D investment is peaking, and that it will be followed by increasing turnover towards the 2nd half of the year, going into 2017.
The market seems to be anticipating success. Although we would love to do so as well, we prefer to let the financials confirm that the anticipated goals will be met. The coming 2 quarters will be critical for this company: a successful achievement of the goals laid out in the previous paragraph will catapult the stock price of WATT much higher. In such a scenario, we believe WATT will be a ten bagger by the summer of 2017.