This article was originally published on August 18, 2020, but we’re getting a lot of questions this week as Koyfman pushes the story heavily again, with a renewed focus on the FCC December auction as a profit driver. What follows has not been updated in any meaningful way, and the ad appears unchanged from August, but I’ll add a short note at the bottom.
I know, that’s a ridiculous headline… sorry. I just copied it from Alex Kofyman’s ad, and he certainly has the same tendency toward hyperbole that we see in many of his colleagues. These days he calls himself “America’s Microcap Expert,” and says that this stock is “my most important discovery” … with the urgency that you must “Discover the Details Before a MAJOR December Event Sends Shares Skyrocketing.”
So what’s the deal? Well, he’s peddling a special report called “Forever Memory: Retire Rich on the Semiconductor Revolution,” but what he’s really selling is a subscription to his Microcap Insider ($999 for the first year… and unlike most publishers, they’re offering a refund guarantee for the first 90 days). He doesn’t claim to offer two different services these days, so it looks like he has just renamed Penny Stock Millionaire, the service he has peddled at this same price over the past five years. As you might expect for a penny stock picker, our tracking sheets indicate that over the past five years he has teased both big winners (recently Exro finally had a surge after being teased for years, and Nano One has also done well) and big losers (Patriot One, Crop Infrastructure, Hudson Resources).
The basic spiel this time is that he has found a chipmaker who will bring forward the next iteration of memory technology, some kind of non-volatile memory that can hold data without consuming power… and that this will be key to the growth of the Internet of Things, which in turn will be driven by 5G network adoption… and to add another card to the house of cards we’re building, investment in this sector will shoot higher on December 8, when the government opens up new spectrum.
Here’s a little taste from the ad:
“Forever Memory has unlimited endurance. Data physically cannot become corrupted by too many write cycles, which is why the global shift to Forever Memory is virtually guaranteed.
“It can’t be overstated how much digital progress depends on this innovation…
“Artificial intelligence, cryptocurrencies, virtual reality, blockchain, big data, self-driving cars, augmented reality, telemedicine, the internet of things…
“On a mass scale, these new technologies have no future without the advantages Forever Memory offers.
“Given this company’s size, (its current value is right around $120M), the potential for growth in the next few years is easily comparable to the gains early investors in semiconductor giant Intel made when its stock skyrocketed 19,803%…”
So what’s the actual product? Here’s more from Koyfman…
“Forever Memory works by manipulating the spin of electrons with a polarizing current that establishes a magnetic state to program, or write, the bits in the memory array.
“I know this sounds complicated, but the underlying principle is simple.
“Data in Forever Memory is stored by magnetic elements, and once magnetized, the storage elements don’t require any power at all.”
OK, so it’s a new(ish) kind of memory… any other clues about the company that is developing this technology? We get this…
“This company is one of the very few in the world that can make Forever Memory, thanks to 220 U.S. patents it owns.”
“NASA released a study about it back in 2013, saying this company’s Forever Memory is ‘the technology of choice for space systems in the coming years.'”
The urgency is that the wireless infrastructure for Internet of Things devices, which will be particularly in need of some kind of low-power memory technology, is still, so Koftman implies, on the drawing board…
“You see, while there are already a ton of internet of things devices out there, we’re still in the beginning phases, because billions of new devices can only function properly if there’s a wireless infrastructure that supports them.
“And this infrastructure is about to come online.
“We know how it will happen, and we know the specific date.Are you getting our free Daily Update
"reveal" emails? If not,
just click here...
“This infrastructure will be switched on by the federal government on December 8, 2020… “
We’re also shown some documents that “prove” this technology is in demand, and production is ramping up — including, for some reason, the header of the company’s latest 10-Q (that’s the quarterly form that is the basis for company earnings reports).
Which lets us confirm with certainty that the stock being teased here is Everspin Technologies, with the you’re-making-this-too-easy ticker MRAM (the tease is full of quotes and references to what is clearly Magnetoresistive Random Access Memory, which is abbreviated MRAM and is one possible successor to the current DRAM standard and other non-volatile memory technologies).
That 2013 NASA report, by the way, is here if you’d like to see it.
Everspin is not at a $120 million market cap any more, it has come back down from its highs of a few weeks ago, but it’s still pretty close — almost exactly at 100 million at the moment (that’s on 8/18 — renewed attention has brought it back to $140 million in mid-October). And there is some evidence that after several years of false starts, they are indeed beginning to ramp up production and might be able to ramp up their revenue, while also cutting into their cost structure a little bit to try to please investors.
This was a venture-funded company about five years ago, with funding from big companies in the chip/memory space like GlobalFoundries and Western Digital, and from a first glance through the presentation and their history it looks like they’ve succeeded in building a niche business with high-spec customers like the military… but haven’t yet gotten designed in to many larger-scale products. They went public at a rough time, just a few weeks before the 2016 elections (at $8 a share), and had a nice little run for a brief while when revenue picked up right away in 2017, but with a big secondary offering in 2018 and revenue falling pretty sharply in 2019, the stock has been fairly moribund after that initial burst of enthusiasm.
If you want to get a better handle on the company, they post a Wall Street Transcript interview with CEO Kevin Conley here, and their latest investor presentation is here. That will give you the overarching story that the company wants you to hear… and the financials will remind you that the business is fairly steady on the top line but hasn’t shown any real growth trend yet, and on the bottom line is gradually improving, presumably through cost cuts (they’re not profitable yet, but their cash consumption has generally fallen over time).
And the most recent news was pretty solid — their second quarter, announced a couple weeks ago, had the highest revenue number they’ve reported in a couple years… which is perhaps a nice sign, they say the growth was due to higher demand from data centers, and the ramp up of their 1GB STT-MRAM product… though they also indicated that their customers are facing delays in product development, which probably means that the next quarter will be a little softer. Their transcript from that earnings call is here if you’d like some more commentary from the company. My read on all of that is a company with some optimism about the future as their technology continues to develop, but without any expectation that they’ll see a surge much higher in demand — they refer to the past quarter as a strong one, and imply that things will be slightly soft as they “digest” that big move and wait for some inventory to be worked through by their customers. When pressed about whether their past design wins means that revenue growth will pick up again late in the year, this is what the CEO said on the call:
“What I would say is that we’re certainly going to be working to prepare for stronger demand coming out of Q3 and laying the groundwork there, should it appear. It is hard for me to give you much color beyond Q3 in the current environment…. But certainly, we do think there are some areas of our business that have the potential to drive growth in the fourth quarter.”
If you’re interested in MRAM more generally, I can at least point you to the articles Koyfman is quoting — though none of them are specifically about Everspin.
From the ad:
“As Professor Pedram Khalili from Northwestern University explains, ‘[DRAM] cannot sustain the rapid growth of data-centric computing.’
“ScienceDaily says ‘[Forever Memory] could help solve AI’s ‘memory bottleneck’.'”
Both of those quotes are from this February 2020 ScienceDaily article.
“MIT News reports this could reduce the ‘power consumption of data centers… by 90 percent.'”
That’s from this MIT News piece.
“And digital infrastructure specialist Ted Letavic even predicts, ‘We could achieve a 100 or 1,000 times lower power [consumption].’
Which is from a GlobalFoundries press release.
MRAM has been in development for a long time, and it looks (to this non-expert) like it has been advanced with some new discoveries and breakthroughs in the past couple years. According to that GlobalFoundries release (GlobalFoundries used to be the manufacturing division of chip giant AMD, it was spun out in 2008 and is now a private foundry company making specialized chips, Ted Letavic is their CTO), both they and chip giants Intel, Samsung and Taiwan Semiconductor are all pushing MRAM advances right now. GlobalFoundries says that they are the first to commercialize eMRAM production, as of earlier this year, and they are also partnered with Everspin on developing some MRAM products, particularly Spin-Transfer Torque MRAM (STT-MRAM).
And Koyfman quotes another piece here:
“Semiconductor insider Jeff Lewis says that the combined IoT appetite for power ‘will create an aggregate power catastrophe.'”
That’s from an EE News article here, and it’s an interesting one so I thought I’d excerpt a couple paragraphs for you:
“Hardware has emerged as the new AI battlefield. Necessity begets invention, and the necessity for faster AI chips that use less power has opened opportunities for potentially denser, more efficient memory technologies.
“One such promising technology is magnetic RAM (MRAM), a memory that’s bound to cross paths with AI as it rapidly moves toward higher density, energy efficiency, endurance, and yields. The semiconductor industry is beginning to invest heavily in MRAM, as the technology’s potential slowly becomes reality. Initial research has shown it offers a number of benefits that are ideal for intelligent edge applications….
“Since MRAM uses a very small memory bitcell, it can be three to four times denser than SRAM, allowing for more memory to reside on-chip and thus eliminating or reducing the need to shuttle data off-chip. MRAM, is also non-volatile, meaning that data is retained even when the power is shut off. This virtually eliminates memory leakage, which is critical for applications where the AI chip remains idle for extended periods of time. MRAM isn’t the only memory getting attention. The demand for AI applications and intelligence at the edge is leading a memory revolution within the semiconductor industry for a wide variety of applications.”
Sounds interesting, right?
So why hasn’t Everspin generated a surge in design wins, and a rapidly rising flow of royalty revenue and joint venture payments? That I can’t tell you, but it seems to me that it is still pretty early days in MRAM development, the technology is not yet mainstream for large-volume projects and might never be, probably because their MRAM products need time (and continued R&D) to catch up with established technologies on boring stuff like cost and storage capacity. Who knows, maybe Everspin will end up owning some key technologies that are spurred to more widespread adoption over the next few years. It’s not likely to be easy, not going up against lots of other MRAM-based technologies and other non-volatile memory projects being developed by major players in the chip business, but it is, at least an interesting “pure play” on this little niche in the memory business.
As far as the invented deadline in the ad goes, there is an auction of C-band spectrum scheduled for December 8, and that is widely seen as being important for expanding 5G availablility (though the satellite earth station users who depend on the C-band now are not happy), but there are a lot of moving parts in rolling out 5G and building Internet of Things devices that might use the many different wavelengths that will be part of 5G… that one auction is part of a long term evolution for 5G, and is not by itself going to have an immediate impact on MRAM technology in general, or on Everspin’s business in the near term. Companies that are choosing memory technologies have known for years that 5G is coming, and their product design decisions are made over many years, the flip of a new switch at the FCC is not going to create a surprise surge of revenue for this company because suddenly manufacturers decide they need this memory by the end of 2020. Maybe investors will get excited about Everspin at some point in the next few months, maybe not.
You certainly don’t have to believe in the idea that this stock will really go up by 312X in four months (that would be his teased “$1,000 to $313,000”) to think that the company might have some rational appeal as an investment — which is good, because that’s a crazypants forecast. This is a real company, with real revenue, but it also has been a niche business that makes stuff for pretty small markets so far… with a four-year public history that has indicated the growth in their business is both challenging and inconsistent. Companies on the verge of absurd surges in growth do not usually worry about cutting a few hundred thousand dollars from their operating budget to keep the lights on, but microcap R&D-based companies who burn cash and don’t have serious revenue growth do have to watch that bottom line if they want to survive and keep their investors patient… and MRAM is clearly in that latter category at the moment. Maybe it won’t be in the future, I’m certainly not expert enough on the sector to give you a projection on that (and Koyfman has had both successes and failures in his heavily teased penny stocks — with the most recent big winner being Exro, which rewarded the folks who patiently waited for a year or two for it to take off), but you can read up and think through the possibilities as you consider whether it’s a stock you want to buy.
10/19 update: There is no fundamental news at all in the last two months, the company is due to report its next quarterly earnings in about two weeks… and it is still expected to be a relatively weak quarter, so probably any commentary about next year and any licensing or production updates will be what drives the stock in the near term. The one analyst who covers the stock, from Needham, remains quite optimistic about their potential bounce-back in revenue as data center demand increases for their STT-RAM products. MRAM stock is up about 36% since we published this article in August, easily outpacing the ~10% returns of the Philly Semiconductor index during that same time period.
So… does that kind of speculation on future technologies fit your portfolio? Do you understand what they’re talking about in the conference calls and see an edge for Everspin? Think they’ll be leading hte memory business in a decade, or forgotten as a has-been? Let us know with a comment below. We’ve left the original comments from August appended here, in case that provides any helpful perspective.
P.S. Fan or foe of Koyfman’s microcap newsletter? If you’ve ever subscribed to Microcap Insider, please click here to share your experience with your fellow investors.
Disclosure: of the stocks mentioned above, I own call options on Intel. I will not trade in any covered stock for at least three days, per Stock Gumshoe’s trading rules.