Another day, another 5G tease — only this one is a bit odd, since it comes in the form of a teaser pitch for an energy-focused newsletter, Keith Kohl’s Energy Investor over at Angel Publishing ($99/yr). These ads started rolling just before the holidays, the earliest one I saw was on December 20, but I just got a bunch of questions about it today so I guess they’re still circulating widely. So what’s the story?
Here’s a little taste of the ad, which opens with a photo of a generic office park complex:
“You would never know it from the outside of this building…
“But right now, a fleet of trucks is leaving this highly secure, nondescript warehouse in upstate New York.
“Inside these trucks are tens of thousands of tiny modules.
“Each one is tiny, no bigger than 10 grains of salt.
“And this brand-new hardware is a vital component for the 5G revolution.”
This is actually an easy one, since we’ve seen that building before, but let’s just run down a little bit of his pitch before we toss it to the Thinkolator for confirmation…
“This is about a government-mandated program I call 5G-Volta.
“5G-Volta could be your shortcut to tremendous wealth in the year ahead.
“Because this program is expected to be as big as $1.5 trillion.
“It’s by far the biggest 5G story of 2021.”
And this is how he sqeezes a 5G story into an energy-focused newsletter:
“This technology is on the brink of epic demand. As I said, 5G-Volta will turn a $3 trillion industry upside down.
“This industry is at the core of our national defense, vital emergency services, critical infrastructure, and economy.
“You see, 5G sensors based on this tiny module will soon be sitting on 1.58 million high-voltage transmission towers…
“On more than 100 million utility poles…
“In 55,000 substations…
“And in the utility meters of 128.58 million American homes, 18.6 million commercial customers, and 840,321 industrial customers.
“These tiny modules are THE vital components to America’s biggest infrastructure overhaul we’ll see in our lifetimes…”
So it’s not just a gazillion iPhones and cellular antennas, it’s that 5G will enable the “internet of things” to monitor, control and modernize the electric grid.
And there’s plenty of push in government to invest in infrastructure in general, with the modernization of the power grid being a key part of that….
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“… our power grid is the biggest “machine” in the world and it hasn’t seen a bigger upgrade since it was built more than 100 years ago.
“You can jump on this $1.5 trillion project by simply buying this tiny company’s $8 stock for four-digit gains.
“Just like those who had the foresight to jump on the smartphone, the streaming, and the gaming revolutions….”
So apparently the power grid is “in dire need” of these “modules,” providing sensors to alert of failure (among other things), and 5G makes it feasible to connect these thousands of new sensors.
And then he gets a bit more hypothetical, if you ask me…
“… the biggest program by far will be 5G-Volta…
“It’s expected to be 24,866% bigger than “standard” 5G.
“Remember, at least 101 million 5G sensors have to be deployed across the power grid… and all of them require this tiny module from one little-known company I’m revealing today.
“This brand-new piece of hardware is the real driver behind 5G-Volta and the reason why a modest $500 stake could turn into $20,945 before 2021 ends.”
And as copywriters always do, they make a big surge seem like almost a foregone conclusion:
“One tiny company will dominate this $2.9 trillion opportunity.
Its 32 patents are the key to this once-in-a-century event.
If this company captures a mere 0.005% of the proposed spending, it’ll experience a 4,089% surge.”
What else? We’re told that at $8 it has a market cap of just $314 million, and that insiders are buying up shares…
“Members of this company’s senior management just spent substantial amounts of their private wealth to buy shares.
“Its chief product officer secured an additional 50,000 shares and now holds a total of 249,127…
“The executive vice president upped his position by 25,000 shares and now owns 193,421…
“And the CEO sits on a staggering 2,962,062 shares after recently purchasing an additional 50,000.”
Why is it that we expect big gains “after January 31?” No details on that are provided, which usually means it’s a made-up date, or they’re just hoping that the next scheduled earnings report will be a big one.
So what’s the story? This is our old friend Akoustis Technologies (AKTS), the maker of RF filters which has been pitched or promoted as a “key to 5G” by Jeff Brown, Ian Wyatt, Chris Wood and George Gilder, among others I’m probably forgetting over the past few years.
And no, it’s not at $8 at the moment — they recently got their first order for a 5G filter assembly for mobile devices, selling filters to go into a chipset which that unnamed customer is expected to sell starting late next year. They had a couple orders previously for next-generation WiFi and WiFi 6 filters using their XBAW filter technology, and for small cells for 5G networks, and that was encouraging late last year as their sales just begin to ramp up, but this new 5G mobile device order seemed to really ignite some investor excitement — and it came at the same time as some investor presentations, so that helped as well. Who knows, maybe this pitch from Kohl helped to juice that as well.
There’s no insider buying, however, and there never really was — the CEO, Jeff Shealy, did pick up 50,000 shares over the summer, but that was an award, not a purchase… in fact, it looks like Shealy has reduced his position by more than half since last Summer, selling roughly $13 million worth of shares in the past four or five months. That doesn’t necessarily mean anything, insiders always tend to be sellers, particularly for younger companies or when shares might be a big part of corporate compensation, but don’t get yourself excited about any “insider buying” trend at Akoustis — there isn’t one.
That handset news which helped drive the shares higher was previewed a little bit in their last earnings call (in November) — this is what they said on that conference call:
“The mobile handset market is our largest potential BAW filter market opportunity by both unit volume and revenue. Our XBAW filters have already been evaluated by several select top Tier 1 and the Tier 2 mobile handset OEMs, and we are seeing increased interest in using our XBAW filters in the mobile device market. As we have discussed before, entering the Tier 1 handset market in the near term would require a partner. However, we believe, with our ongoing 500% capacity expansion of our New York fab, that we will have the wherewithal to enter the handset market servicing one or more Tier 2 handset OEMs without a partner.”
So they don’t quite have that tier-1 OEM customer for high-volume production… but they have the next best thing, I suppose, in a tier-1 supplier who wants new 5G/WiFi filters, starting with samples that Akoustis say sit will deliver in the second half of this year “for consideration in filer modules for 5g smartphones, tablets and other mobile devices.”
Akoustis remains quite tiny, but that jolt did send them up over a $500 million market cap. They have begun to ramp up capacity at their foundry in Canandaigua, NY, and they are fulfilling some orders now, so they will have a bit of revenue growth next quarter — they said they expect to top $1 million in revenue for the first time in the December quarter, roughly a 50% jump from the September quarter and probably roughly 100% growth year over year — but, of course, they’re really still in startup mode for real production, future sales are not really guaranteed, and they’re likely to have expenses of more than $10 million a quarter for the foreseeable future. It’s going to take a couple years for revenues to catch up with expenses, even if we assume that they reach some hugely ambitious goals — analysts are forecasting $50 million in revenue in FY 2022, which starts in about six months, and given the costs of expansion this year they still don’t see that being enough to generate a profit — which means they’re likely to raise more money at some point, though that’s not at all urgent.
So, still an interesting story, and it’s still true, as it has been for a few years now, that the demand for RF filters will grow dramatically as 5G and WiFi 6 roll out and require far more sharing of spectrum… though I wouldn’t overthink any particular demand from electrical grid infrastructure rollout anytime soon, and there will almost certainly be a lot less money in that than in mobile handsets for the foreseeable future.
Akoustis in a good spot in terms of being in the right sector at a time of dramatic growth, but it’s also still true that they’re a minnow in an industry of giants — they could be taken over by Qorvo or Broadcom for a huge premium next week, or they could also see their business disappear if the currently dominant RF filter providers manage to hold on to their market share and keep the new fella out. Part of the call on that is whether or not you think Akoustis, with its XBAW filters, has technology that’s better enough than others to take share, or to demand a high enough price to support a relatively small and inefficient manufacturing footprint, and part of it is the strength and commitment of their partners and whether those initial orders turn into large volume full-priced production runs. I can’t give you an answer on that, but certainly Akoustis has been the most widely-touted RF filter company by the pundits of newsletter world over the past couple years, and it remains quite small and story-driven, so it might be a fun ride if you enjoy that kind of speculation.
And no, there’s no particular reason to think that January 31 will be the start point for the next run — though Akoustis will report right after that, sometime in early February, so perhaps that’s the reason for Kohl’s prediction of that date… they already guided to strong revenue growth in the quarter as they ramp up their expansion project, and they already announced that first RF order for later in the year, which could potentially lead to handset-level volumes in the future, so there’s clearly some good news in the market right now. Whether or not they’ll announce something else to get folks excited next month, well, I’d just be guessing.
So we’ll hand it back to you, dear readers — have any thoughts about Akoustis? Are you one of the many Gumshoe readers who’ve traded those shares over the past couple years following previous teaser campaigns and recommendations? See great things in their future, or hiccups to be wary of? Let us know with a comment below.
P.S. Incidentally, the “fellow traveler” in the RF filter story stock world is also going bonkers right now, thanks to some optimistic words from their CEO last week and a press release about patents this week — that’s Resonant (RESN), which has also been teased by many of those same usual suspects as a big 5G winner.