by Travis Johnson, Stock Gumshoe | April 13, 2016 4:52 pm
We’ve seen a few teaser pitches about “wireless charging” over the past couple years, and it is indeed a compelling story — who among us wouldn’t be happy to have their phone, watch, or other electronic doodads being recharged over the air, relieving us of the irritation of having to find the right cord and plug them in?
And there are “wireless” charging technologies available now, as there have been for several years — but it’s been a slow progress toward what you and I would probably think of as “wireless charging.” The most widespread option is the inductive charging made possible by the two current competing technology standards, Qi and Rezence, which use a charging mat or other close-proximity charger (the Apple Watch and Samsung “wireless charging” phones use Qi, which has a lead in the market — some argue that Rezence has a technological lead). Neither standard offers a huge advantage to any one company, since both are controlled by large consortiums of large companies, and they’re fairly similar when it comes to consumer usage.
This Qi/Rezence fight isn’t likely to have a triumphant winner who rides off into the sunset with all the gold, particularly because similar technologies have been available for many years and have failed, so far, to generate much in the way of obvious profits for anyone (for example: the fact that Samsung has had built-in wireless charging for a couple generations of phones has not led them to wrest control of the phone market from Apple, which so far has failed to build in a wireless charging chip).
And though Android phones have been available with wireless charging built in for a long time, the constant speculation in the market is about what Apple will do… and about whether Apple finally jumping in to the wireless charging business will mean a winner emerges, and will mean that finally someone can convince consumers that they really need wireless charging. When it comes down to marketing, no one creates need better than Apple.
So it’s no surprise that widespread talk of Apple’s next phone (or the one after that) perhaps including wireless charging, is leading to newsletters promoting their favorite wireless charging stocks based on some hope that Apple will choose a particular technology. Though the iPhone-related “what’s built in” speculation wave is not as crazy in recent years as it has been previously, with lots of folks speculating about who would get the design “win” for the latest NFC chip, or accelerometer, or RF chip, or whatever, it is still meaningful because of the huge power that Apple has to sell a lot of volume very quickly.
(Of course, it’s also a double-edged sword: Invensense (INVN) “won” and got their chips built into the iPhone 6, but was so crushed by Apple (and Samsung) on margins that they’ve still not recovered — sometimes getting a design win with Apple is like getting shelf space at Wal-mart, you get a lot more visibility but you’d better be ready to cut your prices to the quick.)
Which leads us to today’s teaser pitch — it’s from Nick Hodge, for his Early Advantage newsletter that often recommends wildly volatile small cap “pre-revenue” stocks (there were a couple in recent years that did OK if you got in early, with the best one being Lite Access, and also several that were crushed, like My DX, Stellar Biotechnologies and Natcore, some of which he has teased and touted for many years — you can check our tracking spreadsheets for more detail).
And Hodge’s ad letter is, of course, completely unambiguous…
“Apple’s Going Wireless
“One Tiny Wireless Electricity Company Just Landed the Deal of a Lifetime…Are you getting our free Daily Update
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just click here...
“A Partnership That Could Pay You 670 Times Your Money! ….
“The tech giant announced that its crown jewel — the iPhone — along with its other most popular products will soon be enabled with wireless charging technology.
“It’s such a fast-growing and valuable market, says ComputerWorld, that ‘industry pundits have openly wondered when Apple’s iPhone would finally take the plunge.’
“Well, the wait is over”
That leads to a screen shot from a Bloomberg BusinessWeek article and video, which does indeed report — based on unnamed people “familiar with the plans” — that Apple is “working with partners in the U.S. and Asia to develop new wireless charging technology that could be deployed on its mobile devices as soon as next year.”
Apple itself, which is famously secretive about upcoming products, has made no such announcement and didn’t respond to the article (or the other hundreds of reporters who ask them about wireless charging every year). You can see that Businessweek article here if you’re interested, it came out on January 28.
Do remember that if we went by “unnamed sources” in the Apple supply chain, or reported just based on what “people familiar with the plans” or other experts are anticipating out of Apple, then Apple would now be in its third or fourth year of selling a huge, premium flat screen TV, and would be on the verge of releasing an Apple Car by next year. These rumors often don’t pan out, or often take far longer to come to fruition than tipsters expect. And Apple sometimes takes a long time to embrace even well-established new standards or features that aren’t yet obviously in high demand from consumers — as with the NFC chips, which were rumored to be in every generation of the iPhone for several years (and had for years been available in phones from almost every other big provider) before they actually were designed into the iPhone 6 to enable Apple Pay.
But still, we’ll follow Hodge’s hinting here and see if he’s onto something new…
“Apple’s move is perfectly timed, with a new report from Juniper Research finding that soon ‘mobile wireless charging adoption will soar, reaching nearly 40% of households by 2020.’
“Think about that for a second… In five years’ time, nearly HALF the homes in the U.S. will use wireless electricity.
“No doubt this is big news for Apple… but it’s a much BIGGER deal for the wireless energy company that just found itself a multibillion-dollar suitor…
“And all signs point to one tiny wireless electricity company.
“Thing is, immediately before Apple’s announcement, tech outlets and investment analysts were already writing about a tiny but award-winning wireless electricity company with ‘multi-billion dollar disruptive potential in wireless charging.'”
And he tries pretty hard to imply that his secret company is obviously in a deal with Apple without actually saying as much (perhaps because it might well not be true, and no one knows), but he does softpedal away from that claim a little bit:
“Truth be told, whether this tiny wireless electricity company’s partnered with Apple or another tech giant doesn’t really matter.
“No matter what, it’s destined to be a serious cash cow.
“Last year it signed an exclusive deal with Foxconn, a $132 billion outfit that produces the most electronics in the world, including Apple products.
“So either way, this tiny wireless electricity company’s in bed with Apple…”
OK… so because they use the same contract manufacturer as Apple, they’re “in bed with Apple?” That’s a stretch, but we’ll let it slide. What company is he actually talking about?
“I first started writing about this game-changing wireless electricity opportunity in early 2015 when I caught wind of its financial backers.
“They’re called the Midas Supergroup…
“And they DO NOT miss.
“When this underground team of elite investment pros decides to take on a project, the results are nothing short of storybook… every single time.
“I’m not exaggerating, either…
“The Midas Supergroup has literally never produced a loser while sparking stock runs of 19,950%, 49,893%, and recently an unbelievable 67,350%.
“And that’s no misprint. If you’d been following this group, you could have netted 670 times your money.”
Oh, geez. So now we have to let the cat out of the bag… we do, of course, know exactly who Hodge is talking about, because he started this “Midas Supergroup” ad campaign touting the same stock about a year ago. Hodge is still teasing the wireless charging company Energous (WATT). My original article “revealing” WATT as a teaser pick from Nick Hodge based on an older ad, and a “Midas Supergroup” company is here, from last February, if you want more detail… including some more perspective on whether that “supergroup” is particularly “super.”
And don’t get me wrong, WATT has been a good trade so far if you bought it at the right time — even if that might be almost exclusively because of this frighteningly nebulous rumored connection to Apple. It’s a very small company, with a market cap now of about $170 million, and the stock was in the $9 neighborhood when Hodge first teased it in early 2015 — you would have had to have some patience to hold the stock through a serious decline later in the year as the stock fell to about $7 and stayed there for most of 2015, and even a bit more staying power as you saw the shares collapse below $5 during the market collapse in January this year. But now, thanks to those Apple rumors, the stock is well above $10 and profitable for most of the folks who bought it over the past year.
And yes, it is really the Apple rumors doing it. That Bloomberg Businessweek article that Hodge quotes was singlehandedly responsible for driving WATT’s shares up by 42% in a single day (that was January 29, the article came out in the evening on the 28th), and a Business Insider “sum up” of the Apple/Energous rumors on March 12 helped bump the stock up to $8 and more in the following days.
That volatile stock price so far this year really tells the story for Energous, and the current story is entirely about getting built in to a “tier 1” supplier — and, more specifically, working on designs with and getting a big deal with Apple by next year. I would assume that no large deal is in store this year for a “built in” energouos chip for any major smartphone, since Energous itself is saying that product isn’t ready and is going to take more development and testing before they get all that close (this year’s focus for Energous is their “mini” device that can charge small stuff like wearables or Internet of Things sensors over small distances), but that “Energous in the iPhone” hope seems to be the investment story that folks are following.
Which means that we’re dealing with pretty pure speculation — there is a real company underneath the “might have a deal with Apple” hype, but it’s probably not a company that should be publicly traded at this early stage… and their initial product, which will be dramatically less exciting than the wireless charging demo they provided at the Consumer Electronics Shoe in January 2015 that got everyone so revved up (and led to the first Hodge teaser campaign), has almost no chance, in my mind, of being large enough to provide meaningful revenue to fund their continuing development for very long.
Which means, the cynic says, that there’s probably a good chance that they will sell shares sometime soon, before this Apple rumor hype fades, to make sure they strike while the iron is hot. They have enough cash to get through close to another year at this pace, but it’s not likely that they’ll have a sustainable business by then, either, so it behooves them to raise money when people are enchanted with the stock.
That doesn’t matter IF you’re convinced that Energous has the world’s best new wireless charging technology, will own the standard for a decade, and will reap huge rewards as all the manufacturers license their technology and chip designs to power the next wave of over-the-air rechargeable devices — if that’s to be the future for Energous, then it almost doesn’t matter whether the company is valued at $20 million or $200 million today, either valuation pales compared to the opportunity.
I’m personally pretty skeptical about the odds of success, very skeptical about Apple building this into their 2017 phones, and I have no particular reason to believe that Energous is the obvious winner in wireless charging five years from now just because they’re the only one that’s currently a “pure play” publicly traded company. That might just be because I’ve seen these kinds of promises in other technologies so many times, or even because, if we take the leap of assuming that Apple is secretly in business with Energous, that Apple’s sampling of and flirting with new technologies and components doesn’t always do their partner companies any good (see GT Advanced Technologies for the most prominent recent example).
And, frankly, it doesn’t inspire “there’s a big Apple deal in the offing” confidence when you see the lack of insider buying. I don’t usually harp on insider selling, since it’s the norm for any startup because insiders often spent a decade building up their company and are looking for a payday, but from what I can tell this company was essentially formed from whole cloth in the Fall of 2013 and none of the folks they’ve brought on board to be board members or executives are buying shares (except for the CEO, who has bought a few times). That’s the norm, so I don’t want to imply that insider selling is always negative, but it wouldn’t hurt to see some insider buying if I’m basing my buy argument on the anticipation of some transformative deal over the next year or so. Presumably someone inside Energous aside from the CEO knows what their near-term prospects are and might feel a bit greedy if there’s good news a-comin’.
I am definitely not an expert on the technology, and most of the folks who discuss the details of Energous products quickly get beyond what I can understand when it comes to efficiency and safety, but it seems as though the “mini WattUp” product, which is what’s likely to be sold this year, is not really delivering on that wireless charging promise because it’s extremely similar to existing products (you have to be within a few millimeters of the charger/mat — it doesn’t have a 5-15 foot charging range, or the capacity to charge many objects from one charger — essentially, it’s like charging your Apple Watch by laying it on a charger instead of actually having to magnetically connect the charger to the back of the watch, so there is a slight difference, though in that example, going by the CES 2016 demo, the watch charger might be the size of a hockey puck instead of the current “gummi lifesaver” size).
On that point about progressively pushing commercialization out into the future, an author at Seeking Alpha posted an interesting bear case parsing their past commentary to make clear that their entire (short) life as a public company has been a story of management consistently moving what he calls the “carrot” point (the delivery of a meaningful commercial product with a tier 1 company), with that anticipated future promise always 12-18 months away.
That’s not necessarily unique to Energous, of course, lots of emerging companies “overpromise” about when they’ll have results, either because they’re genuinely optimistic (or naive), or because they have to raise money, but it means we can hopefully add a little black coffee to our diet now that Nick Hodge has got us drunk on the possibility of great fortunes. There’s a huge amount of debate about this one at SeekingAlpha and elsewhere, as many of you have already seen, and I can’t resolve that — I find the bear case to be more compelling right now, particularly since we’re 15 months past their CES 2015 demo that seemed to work and the 2016 CES presence was much lower-key and focused on wearables instead of the revolutionary “charging networks” we had been hoping for… but I’ll admit that there seems to be an obviously huge potential market for “real” wireless charging at a distance if that technology can be perfected and built into the most popular portable electronics.
But thankfully, I don’t have to decide. I can simply avoid this stock and focus on areas where my understanding is much stronger, which probably ain’t a bad idea for all of us.
(If you want some other perspectives, by the way, other pundits have pushed wireless charging in the last year or so as well — Manny Backus was also a fan of Energous, and Louis Navellier was pitching the larger and more diversified IDTI for wireless charging).
How about you? Taking a flier on this wireless charging story? Think I’m being too optimistic or too critical? Let us know with a comment below.
Disclosure: I own Alphabet/Google stock, and shares and call options on Apple, I don’t have a position in any of the other stock mentioned above and won’t trade stocks covered for at least three days per Stock Gumshoe’s trading rules.
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