written by reader Windstream Technologies and Wall Street Revelator

By Anonymous Questions, October 19, 2014

Received a teaser booklet from Andrew Carpenter of Wall Street Revelator praising WSTI ( Windstream Technologies) projecting a 500%+ run by year’s end.
Anything to their claim’s and/or WSTI!?

This is a discussion topic or guest posting submitted by a Stock Gumshoe reader. The content has not been edited or reviewed by Stock Gumshoe, and any opinions expressed are those of the author alone.

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Travis Johnson, Stock Gumshoe
October 19, 2014 11:57 pm

Very unlikely to be anything worthwhile there — looks like a stock promoter’s pump-and-dump to me.

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Larry Hennessy
Member
October 21, 2014 11:18 am

Travis,
Have you looked into this company or is this just a guess. Their product looks real good to me since the price of electricity is constantly going up. A solar/windmill that’s low cost and easy to install seems like a pretty good idea to me to invest in. Is there something wrong with the company itself? Just curious?

Travis Johnson, Stock Gumshoe
October 21, 2014 12:53 pm
Reply to  Larry Hennessy

Just looked at it briefly now — they have been manufacturing these “Windstream” things (a miniature windmill with a solar panel on top) and the similar mini windmills without a solar panel for three years at their plant in Indiana, and selling them to a few overseas customers, mostly in Jamaica. They say they’ve also just started to manufacture with a partner in India, too.

The order they talk about a lot is from the utility in Jamaica, with an order for 2,600 units over 18 months for a total of $22 million. That’s less than 10% of the capacity of their Indiana facility, they say, of producing 20,000 units a year. If that’s anything like the pricing they’re currently getting (I have no idea, havent’ checked), then that would be about $8,000 per unit. Their last quarter included about $200,000 in revenue, so presumably that means they sold about 25 units in that quarter. They are a start up, to some degree, but they say they’ve been manufacturing in this facility for about three years… and that’s not a ramp up from last year, the revenue is currently down a bit from last year.

The big question, I guess, is both whether they can really deliver on the $20+ million purchase order, which seems like it would require them to increase production from 25 units a quarter to 400 a quarter… and, of course, what the production level is that they would have to reach to absorb their manufacturing and operating costs. Currently, each unit costs them more to build than they can sell it for — that’s not surprising, for 25 units, but those are also just direct costs. The operating and selling and overhead costs are over $800,000, and interest expense alone is higher than revenues right now.

If their selling and overhead and interest costs stay flat as they (hope to) grow, which seems inconceivably optimistic, and they are able to build up to a level to that gives them a gross profit margin of 5% (meaning, the windmills cost 95 cents to build for each dollar of sales), then they would have to hit $25 million in quarterly sales to break even (5% of that would be gross profit, for $1.25 million in gross profit per quarter, which would match their current interest expense plus operating costs). Maybe they can get a gross margin of 20% and the numbers look much better at some particular volume, I don’t know, but that’s still a very small operation so I’d be skeptical — and right now, over the past year, each $1 of product has cost them almost $2 in direct costs to build (materials and labor).

So at 5% gross margins that would be $100 million in annual sales to theoretically break even, assuming that they can work up to a 5% gross margin at that point and that they don’t have to hire any more people in the office or salesmen or incur other costs to increase their sales 100 times (current sales are well under $1 million on an annualized basis). That’s something they say could be done at their current price point (inferred from the Jamaica deal) and with their current manufacturing facility (that would be 12,500 units at $8,000 each), but it seems awfully, well, optimistic.

So yes, this is just a guess but it’s a guess formed from seeing lots of other little manufacturing companies disappear. My guess is that the company is not worth anywhere near $50 million — this looks like an academic startup with a decent-sized purchase order from Jamaica, and I suspect that their only path to possible success would be outsourcing manufacturing to China and licensing the whole thing, but that assumes that substantial demand exists for these vertical rooftop windmills that have solar panel hats.

It’s awfully speculative to me — I have no idea whether or not their product is genuinely unique or more viable than simple solar panels or small windmills that are much cheaper, and manufacturing businesses are not, as a rule, all that scaleable and these kinds of distributed clean power generation ideas and projects are very popular among startups and academics. This looks to me like an appealing startup story, and I hope it works out for them, but it’s really hard for me to come up with a reason to put money to risk in the company… particularly when they keep selling small chunks of stock and promissory notes just about every month (in $100,000-$200,000 amounts, roughly), which gives them somewhat of an air of cash flow desperation.

There was a big debate over this one on Seeking Alpha a few months ago, by the way — I haven’t read through the arguments from the short sellers or the responses from the company, but I would urge anyone who is interested to read through them in detail before buying the stock. It’s possible that it’s not a pump and dump operation, but it is a small and promotional stock that looks like it very much needs to use stock sales to finance their operations for the foreseeable future.

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stock_er
Member
October 22, 2014 12:39 pm

Thank you kind sir for you input. I like your reasoning.

sgwillb
Member
October 20, 2014 12:22 am

Hi Travis,
Received a teaser this morning about a company that is mining reward points similar to Bitcom. States Wall Street is just now beginning to invest heavily. Here is the link.
What company do you think they are talking about ? Thanks
http://pro.wsdinsider.com/TAOREWARDSWCX/ETAOQA28/?

Any info on company would be appreciated.

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