WATT Up With Wireless Charging

12Business Description

Company: Created in 2012, with their headquarter located in San Jose, California, Energous Corporation is a new company engaged in developing a technology called WattUp. It is a revolutionary radio frequency (RF) based charging solution that delivers intelligent, scalable power via radio bands, similar to a Wi-Fi router, for use at home, in the office, in the car and beyond. Its technology is applicable in a range of devices, including wearables, Internet of Things (IoT) devices, smartphones, tablets, keyboards, remote controls, computers, cylindrical batteries and any other device with similar charging requirements that would otherwise need a battery or a connection to a power outlet. It differs from older wireless charging systems in that it delivers power at a distance, to multiple devices at the same time. Therefore, it will result in a wire-free experience that saves users from having to plug in their devices. The Company is engaged in developing a solution that charges electronic devices by surrounding them with a contained 3D energy pocket.

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Software
: The entire WattUp wire-free charging process is software controlled when using a Midsize or Full-Size WattUp transmitter. Using either their app or cloud-based web portal, you can identify which devices you want to receive power, how much power to send to each device, and even at what times you want them charging. Their Software enables users to establish the order in which devices receive power, and sets specific levels of power to send to each device. The software creates a schedule for charging, and or deciding what times of day to send power to each device. It allows the user to identify whether a device receives a charge automatically or not. Finally, it lets users find public WattUp locations on a map, whether they are free or paid systems (including the rate). 

Transmitters:

The Near Field Transmitter: This transmitter reference design represents the smallest and lowest-cost WattUp transmitter option and it is similar to the Qi products. With low materials cost and small size, this design is intended to be an in-box solution for many small electronics, ultimately replacing the USB cable and power adapter typically included in the box. The Near Field WattUp transmitter technology can be utilized in laptops, tablets, game consoles, furniture, and other devices. However, this technology is not considered a wireless charger since it requires a physical contact between the phone and the transmitter.

The Mid Field Transmitter: This transmitter reference design represents a tabletop or close-distance charging design of 2-3 feet. Imagine all the small devices on your desk, table, or front seat of your car all charging without having to be plugged in. The Mid Field WattUp transmitter technology can be designed into the bezel of your monitor, as part of a small sound bar, desktop speaker or other similar devices. Software control allows multiple devices to charge simultaneously at different levels with complete authorization and prioritization capability.

The Far Field Transmitter: This transmitter reference design represents the furthest distance charging for the WattUp ecosystem. A Far Field transmitter may be embedded into the bezel of a TV, sound bar or may be mounted on the wall or ceiling. This design enables maximum coverage and allows meshed-network coverage where multiple transmitters are linked together to cover larger spaces. Just like the Mid Field design, the Far Field transmitter is fully software controlled.

4Receivers: WattUp uses packet-forming technology to accurately direct energy to the receivers. The technology dynamically adjusts the shape and content of the radio frequency waves so they can be directed to a specific location in 3D space. There are energy gathering receiver’s antennas where WattUp ASICs convert the radio RF signal to DC current, delivering a charge to the battery. Using smart antenna technology, power can be delivered in small amounts. Energeous uses the world’s first RF-Power receivership and it only 3×3 mm. this receiver technology can be embedded into virtually limitless number of different devices.

Patents: Energeous’ most valuable asset are the numerous patents. There are several innovative products related to the WattUp ecosystem. Energeous currently has 250+ patents applications, 27 allowed applications expected to issue shorty, and 27 patents awarded. There numerous amount of patents that greatly limit their competitors from duplicated there technology. There most valuable patent is the ownership over their methodology for wireless power transmission based on pocket forming. Pocket-forming is transition of power between the transmitter and at least one or more receiver. The transmitter identifies and locates the device, and aims pockets of energy generated through constructive and destructive interference picked up by the receiver’s antennas. They own the rights are the only wireless charging and powering device allowed in an enclosed vehicle. Additionally several of their own invention/products that are suited for the WattUp ecosystem are operated. Such as wall mount power sources, laptop powered power transmitters, antenna arrangement, and TV and computer monitor design.  They have even patented designs for refrigerator receivers, car matter receivers, and larger electrical devices. Once their transmitter come to market they own so many patents, it will be virtually impossible for competitors to catch up or compare to their abilities.

Industry Technology:

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Inductive: Inductive charging is typically used for medium sized devices, such as a few different types of smartphones, tablets, and MP3 players. When this method is used for wireless charging, an adapter that contains contact points is attached to the back or inside of the device. When the device battery require charging, you must place the device on the consecutive charging pad or port. Inductive has been recently dubbed as the Qi standard, and has been adopted by Apple in their new IPhone 8 and IPhone X. the issue is that Inductive is not truly wireless. A device must be in contact or places directly over the induction point, making the charging spectrum 2-dimensional. Their market share for inductive technology in wireless charging is about 50%, and it projected to bring in nearly $1 billion of revenue. There is not much room for exponential growth since other technologies, such as RF are growing. Their market share is expected to decrease.

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Resonance Charging: Resonance charging is typically used for devices that need a significant amount of power. These are devices such as large computers, electric cars, and robotics. This technology is utilized more in the automobile sector, healthcare, and industrial. Resonance charging involves a copper coil, which is attached to the device that requires charging with another copper coil attached to a power source. Wireless charging takes place when both copper coils configured to a common electromagnetic frequency. Wireless resonance charging can be accomplished over short distance if the power generated is powerful enough, but there power is diluted over the distance traveled. Resonance power is growing, but so much in the consumer device sector. The currently possess 30% of the market revenue, and holds about $600 million in revenue in the industry. Resonance it is accepted to decrease in consumer devices segment as RF become more popular.

Radio Frequency: This type of wireless charging is used to charge devices that run on small batteries and utilize little power. That include wireless keyboards, smartphones, medical devices, tablets, and watches. These devices already use radio waves to send and receive wireless signals. Wireless radio charging involves a transmitter that is connected to a socket in order to generate radio waves. When your device receiver is configured to the same frequency as the radio transmitter, you can charge your battery. RF currently only possess about 205 of the market share in wireless charging, mostly in the consumer devices segment and partially in the healthcare segment. They are the fastest growing technology in the industry, and are expected to have a CAGR of nearly 30% over the next five years.

This graph demonstrates the difference between two-dimensional and three-dimensional wireless charging. Inductive charging provides a very small radius of charging between the device and the charging matt, and the power transfer requires direct contact with the power source. Resonance charging requires either direct contact or very close proximity with the power source of the transfer to occur. Radio Frequency power transfer is the only three-dimensional method that allows devices to be anywhere within a designated circumference.

Investment Rationale

Game Changing Technology: WattUp is the only true wireless charging system. This concept of cord cutting has completely changed the way  mobile devices are used. This will keep growing in the next few years. From the Ethernet cable to Wi-Fi connection in 1997, from aux connection to Bluetooth, and now from plugin charger to over the air power transmission, this idea of no cable life is taking over the technology industry. People have brought different issues concerning chargers in the past, such as losing/breaking their cable or using their devices while powering them. In this sense, mobile companies are starting to look at a different ways of having a more effective battery system, and for this reason, we predict that this system will be a significant and growing market opportunity across multiples industries. WattUp system will solve the problem that consumers face concerning battery longevity and mobility, because the capability of energy transition will be available anywhere at any time around the power transmitter. With their Mid-Field and their Far Field Transmitter, consumers will be able to charge any king of devices (phones, headphones, batteries, connected watches, etc.) up to 15 feet by 2018.

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Virtual Monopoly: With currently hold 250+ patent applications, 27 patents, and 27 allowed applications expected to issue shortly, Energeous has a virtual monopoly over there product line and software used to operate their products. There most important patents Energeous possesses is the Wireless Power Transmission with a Selective Range patent. These patents allow Energeous to be the only company to use the methodology that makes their products disruptive. The methodology includes one transmitters and at least one device, in a certain radius, to transmit pockets of energy to the device in order to power it. There are similar companies that are selling wireless charging stations, such as Qi, but Energous has zero competition for long-range wireless charging in the consumer electronics market. Qi wireless charging is a mat or disk that you most place the wireless devices in order to for the energy to be transmitted. However, Qi wireless charging might be considering as fake wireless, since it requires a physical contact between the phone and the disk. On the contrary, Energeous’ product line allows mobility while powering the device. In this sense, it will rapidly take control of the entire market. It is essentially just as limiting as charging with a cord because it restricts physical location with the device. In addition, Energeous products allow you to transmit energy to multiple devices, not just one at a time such as Qi. Energeous patents ensure they are the only company with control of their disruptive methodology, creating a virtual monopoly.

Takeover Target: Being the first inventor of the Over the air power transmitter, Energous has proven itself a strong acquisition target for larger technology companies. They recently got their nearfield transmitter certified by the FCC, and Energous should have their mid and Far-field transmitter approved by 2018. This recent approval has generated a lot attention for the company. Early in 2017 there were rumors that tech giant, Apple, was looking into working with Energous for wireless charging for their new IPhone 8 and IPhone X. Even though partnership was not factual, it proves that Energeous is an emerging company and target partner or takeover target for large a tech company because their disruptive technology will replace everyone else. The CEO recently released a statement saying they have a key strategic partner, but they are not at liberty to reveal the name of their customer. Due to the disruptive nature of their products and their relatively small market cap of $339 million, the company and the market seem to agree that they are the target partner for many technology companies.

Growth drivers:  

Potential of powering every electronic device: The wireless charging market is expected to grow to $5.5 billion by 2020. When Energous will receive FCC approval for their proprietary wireless-charging technology, they will become the main wireless-charging supplier for every devices in the consumer electronics market. Now, the Far Field Transmitter is able to give enough power to anything in the world that use 5.5 Watts. In general, 5.5 Watts represents any small/mid sizes devices that you could imagine plus the one that you cannot think of. The most common device would be smartphones, tablets, headphones, or watch connected. However, there is limitless number of electric devices that the WattUp system would be able to power up. In theory, they can build their infrastructure to power an electric device. In a household, for instance, the WattUp system will be able to charge all personal devices such as electrical toothbrushes, razors, and e-cigarette or home device such as clocks, TV remote, and fire alarm and so forth… the list is long.

New infrastructures in public areas: Energeous has to potential to move beyond business and home ecosystems. They could even move into large public locations. If Energeous gains FCC approval, they will be the first wireless transmission service to gain access into selling and expanding their product line. Energeous is the first to market and it gives them an advantage to build out their infrastructure before competitors enter the market. Energeous could expand into homes, business, cars, coffee shops, airports, hospitals, and virtually any public location. The methodology behind their power transmission enables them expand rapidly. The device that is receiving the power most have a power receiver. The platform must be widely used in order for consumers to power their electronic devices at home and in public places. Meanings, once WattUp moves into home and work environment, public locations must also use WattUp since consumers are already using that powering platform.

Easy transition:  The transition process from cord to wireless charging, aka cord cutting, will take time. Most mobile devices have unique battery systems inside of them that will require a receiver chip. Such as cell phones, tablets, or watches. In order to expand the power reach, WattUp plans to develop their own induvial battery system. Instead of consumer using other brands, such as energizer or Duracell, they will buy WattUp batteries that already power receivers inside of them. This will ease the transition for consumer to adopt to the WattUp platform, because they will be able to connect a limitless amount of devices to these power transmitters. WattUp is creating a widely used powering system that will cause consumer to adopt to their platform due to the accessibility and ease.


Industry Overview

The growing demand for smartphones is driving the adoption of wireless charging. Chargeable devices, such as smartphones and tablets, are progressing and are becoming nessesary items for everyday life. Factors such as mobility issues and longer charging times for devices poses a potential challenge for the overall mobile deceive market. This market in segments into several different applications, Consumer applications, automotive, industrial, healthcare, and defense. Growth prospects for the market seem very bullish due to the growing adoption of this technology in consumer electronic devices, which accounts for over 60% of the global revenue. Wireless charging can also be split in to three different types of technology used to transfer powers. They are inductive, Resonant, and RF (Radio frequency).Currently the most popular types of wireless charging is inductive, holding about 50% of the market. Inductive is considered mature and is in high demand, but RF is becoming more and more popular.

 Competitors: Wireless charging is highly fragmented with good mix of start-ups and large market cap participants. Significant investments in R&D are being made by the market participants, wherein the leading players are focusing on improving the power transmission range. Players are trying to distinguish themselves on the basis of quality and affordability. Few of the key players in the wireless charging market include Qualcomm Inc. (NASDAQ: QCOM) , Fulton Innovation LLC, WiTricity Corporation, Enersys(NYSE: ENS), and Energizer Holdings (NYE: ENR).

Future Outlook: This is a relatively new industry and currently is in its growth phase. The wireless charging market is currently valued at $3 billion, and its growing at 39% a year. By 2023 the wireless charging market is going to be valued at nearly $23 billion. This market is made of several segments, including automotive and health care. Energeous specializes in RF wireless power transfer which is used mostly for small and portable devices, so they are in the consumer device segment. Consumer devices, meaning tablets, smart phones and other chargeable devices, make up about 60% of that market. Elimination of the hassles caused due to wired chargers and unavailability of electric point’s at most public places has resulted in the growing prominence of cordless power. Healthcare and defense are expected to emerge as promising sectors as well. That makes the consumer devices market value about $1.8 billion dollars. RF-based technology is expected to gain prominence as is eliminates the need for proper alignment in case of small devices such as wearable and medical implants. The largest sector holder is inductive power transfer, which holds about 50%. RF wireless currently only holds about 12% of the consumer devices sector, but it’s expected to grow rapidly over the next few years.

Industry Growth and Drivers Challenges: Since Wireless chagrining is a relatively new industry there are many growth drivers and challenges ahead. Wireless technology is more applicable to charge smartphones, tablets, and other small hand-held devices wearable technologies. The market is developing due the rapid updating of smartphones, and the shirt to cord cutting. The main devices that are growth drivers for Energeous and the customer devices segment are personal mobile devices such as cellphones, tablets, and smart watches, other small chargeable devices. Currently 95% of American’s own cellphones, and of that 77% are smart phones. The amount of people that own cellphones has been increasing 4.5% a year since 2013. Nearly 45% of American now own tablet computers, and they are growing on average 2.9% a year.

Key restraints behind wireless charging is the lack of standardization and expensive research and development involved in the pursuit technological developments. There are several different technologiesused for wireless charging, and inductive and RF are the most efficient. Since there are so many competitors in this industry, first movers advantage and competitive positioning is essential for companies to capture market share.

Competitive Positioning

From 1D to 2D charger, a fake wireless: Since the wireless charger industry is really new and has a tremendous growth potential, a lot of companies will try to develop wireless charging technology to supply the billion of electronic devices. Knowing that, it is easy to find multiple competitors for Energous usingthe 2D charging technology such as Qiwireless, Powermatt and Witricity. More in details, 2D technology recharging, better known as Qi, is based on the principle of electrical induction. However, induction recharging is not new: it has been used for many years with electric toothbrushes, to avoid any risk of electric shock to the user. It is now enjoying a good day with smartphones devices. Its technology is simple, since it uses a  circulation of an electric current in a copper coil (wire winding) creating a current in another coil

 located near to it. When it is powered by an electric current, it produces a magnetic field. When the device is placed on the charger, their proximity induces an electrical current in receiver charging its battery by the created magnetic field. As the device to be recharged does not have an internal electric coil, it must be connected to an external coil so that the energy transfer can be made. In this case, the transmitter is connected to the power connector and acts as an intermediary. In this sense, the Qi wireless company requires a physical contact between the device and the transmitter, so it has a radius of 0 mm. Powermat is a similar technology with a stronger induction power permitting the device a 5mm range of motion on the vertical axis above the transmitter. The longest distance existing with the 2D charging was accomplished by Witricity with a distance of 18mm above the transmitter. Therefore, it doesn’t make much of a difference with using a regular wire (1D), because there have the exact same role in the power transmition chain using different technologies. This technology does not allowed the customer a full range of motion while charging his device. Considering this point of view, the Qi teghcnology could be considered as a fake wireless system.

A disruptive technology: RF System (3D): When it comes to a matter of distance Energous has a huge advantage because they use over the air power transmition technology. As we expressed earlier, Energous has more than 270 pattens focusing mainly on Mid and Far field wireless charger focusin gon the Rf system. This transmition technology is totally different since WattUp operates over the unlicensed WiFi ISM band between 5.7 and 5.8 GHz, and uses the same open-frequency transmitters as typical WiFi hubs, to comply with the FCC’s regulation on interference with other devices.  Their Mid field technology (2 to 3 feet) is already beating all of its competitors in the wireless charging market, since they are the only one doing 3D charging technology.  Then, they extend their technology up to 15 feet being the only one able to do so, giving them a large competitive advantage distance wise.

 First movers advantage: Energous is the first RF wirless chargning company for consumer deivces to apply for and gain FCC approval.  They have gained approval on their near field wirelss chargning that his the market at the end of 2017, beiggning of 2018. They are excepted to gain approval for there mid and far field trasmitter before the end of the year. This will alow Energous to be the first FCC aproved RF wireless charger on the market. The faster their product comes to maktet, the more people will adopt there platfom and begin using the WattUp system. Being the first FCC aproved product to market is a huge advatgae over the competition beucase it allows them to sieze marketshare and retain consumers beucase they have already adopted their platfrom and are less liekly to shift to another. Antioanlly, the faster the product adapt in the home enviroment of their consumers, the more likely public envrioment will adopt the product line to attact conumers.

Financial Anaylsis
Top-line growth: Energous top line growth is projected to grow rapily over the next 5 quarters. Since going public in 2014, the only source of income for Energous was from energingeer services. Their energineering serivces include a broad spectrun of consutiling and anaylits services. The first time the company started generating revenue was 2015. They haven’t generated any revenue from their product line because their near field power transmitter will not hit the market until the end of 2017, and won’t have an effect on revenues until 2018. Their other product such as the mid field and far field, will not hit the market till end of 2018, and not effect revenue until 2019. Before the edn of the year in 2017 revenue is projected to be $4.4 million, which is a 202% increase from previous year. After a full year with the near field tramitter on the market and the release of the mid field tramitter, the 2018 revenue is projected to be $42 million, which is nearly 1,000% increase in revenue.

Bottom-line growth: Energous bottom line growth has yet to be profitbale. In fact in the past to years the company has increased thier loss from 27 million to 45 million. That is due to increased operating expenses. At the end of the Q2 ’17 Energous operating expenxe was $13.2 million. They have reinvested 66% of operating into research and develop, beucase their business model is dependant on coming out with innovative wirless charging soltuions. That is by for Energous largest expense beucase they are developing the RF wireless power trasnfer that is the basis of their prouct line. Over the past three years Energous has invested heavily in research and development to develop there RF wireless tehocnolgy. They have financed their research efforts by selling off shares of equity. Once Energous starts selling their products, which is the core of their businees model, while continuing to generte income with engering serivces, their buttom line will genrating postive income at the end of 2019. Ther project net income in 2018 is porjected to be -$15 million, by 2019 net income is projected to be $101 million.

 

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Assumptions

Revenue: Revenue: First, We found projected revenue by looking at Energous market share and using it to estimate the units sold, then multiplying it by their estimated sales prices. Then, we found the market value for wireless charging as a whole. The market is currently worth about $2 billion dollars, and it is estimated to grow at around 40% a year.  In that market, there are 5 major sectors, the biggest of these sectors being consumer devices, which is where Energous operates in. Consumer devices makes up 60% of that wireless charging market. In wireless charging only about 20% of the companies use RF technology to wirelessly charge devices, and nearly none of them operate in the consumer device sector. Since it’s such an underutilized yet effective technology RF wireless charging is expected to grow at nearly 30% of the next five years.

Based on the growth of RF technology, and wireless charging as a whole we multiplied the growth of Rf charging by the growth wireless charging and the current market share of Energous and estimated that nearly .6% of consumers will by the near field product in the next fiscal year, making the 2018 fiscal year revenue $ 42 million dollars.

Cost of Revenue: There will be no cost of revenue until they start selling their near field transmitter. That’s why cost of revenue was not factored in until Q3 of 2017.Cost of revenue is 3 – 4 % in 2017, and 9-10% starting in 2018. Cost of revenue is dependent on the year because a portion of the revenue is still generated through engineering services. Engineering service is accepted to stop being a substantial source of revenue by 2018 once the product line is launched, making the cost of revenue higher since it factors in the cost of goods sold.

Research and Development: The most significant expense for Energous is research and development. This is because the majority of its business model is dependent on their intellectual property and software. The company has historically had a research and development expense anywhere between $7 to $8 million consistently over the past 8 quarters. We maintained that expense prices since they are still developing the far field product line.

Interest Expense: Energous has a capital structure that is equity intensive. They have no long term debt on their balance sheet, only short –term obligations which are mostly comprised of payments to suppliers, bank loans, and debts due over the next twelve months. They have a small interest expense on those notes payable. Its short term asserts is nearly $27 million, while short term liabilities is about $5 million. Energous sutured their debt this way to indicate liquidity, and minimize risk of bankruptcy.

Cash Flows: New growth companies tend to have negative overall cash flows due to heavy investment expense. Cash flows from financing activities was accounted for under external sources such as lender, investors, and shareholder. Operating activities include production of goods and creating their power remitters and recovers, and growth companies tend to spend heavily on investing activities. It is difficult to predict the future cash flows of energies because we cannot say how the product will react in the market place. They may need more external financing or reinvesting revenue to found production.

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Valuation

Total Cash Flow Model: The discounted cash flow (DCF) is a valuation method uses future free cash flow

projections and discounts them to arrive at a present value estimate, which is used to evaluate the potential growth of the stock. The free cash flow growth rate is to volatile and unstainable to use for the fair price

Valuation. Instead we used the growth rate for capital expenditures, which was 10.1% then. We used the companies WACC of 18.1%. The company has no long term debt, so their weight of debt is 0. The cost of equity is 18.1%, so that is the WACC. We found free cash flow of $27.62 million. We found this by averaging the last two free cash flows, they were $21.04 million in 2015, and $34.2 million in 2016. After We divided the FCFF by the shares outstanding, using this procedure We got a fair value price of $17.36, meaning the stock is undervalued by 48.48%.

 Price to Sales: The price to sales ratio takes the price to sales ratio and multiples it by the market capitalization. Energous’ price to sales ratio is abnormally high for the market and the industry, at 126.64. This is because they haven’t started generated any sales from their product line, just engineering services. Instead We average the one month price to sale ratios for four of the industry leader; Steel Partners Holdings LP (NYSE:SPLP), Generac Holdings Inc. (NYSE:GNRC), Argon Inc. (NYSE:AGX), and Eaton Corporation PLC (NYSE:ETN). The ratios ranged from .78-11.70. The average was a price ratio of 5.85. We used a range between 5 and 11 because Energous is releasing their product line at the end of this year, and is exspected to have a higher P/S ratio than the industry based on their projected sales schedule. We created a table to range the project sales between $35 million sniff $49 million. We multiplied the projected sales variables by the P/S ratios and then average them to get a fair value price of 16.78. Which makes the stock undervalued 43.55%.  


Risk Factors

Federal Communication Commission Approval: Their wire-free charging technology involves transmission of power using radio frequency energy, which is subject to regulation by the federal communication commission (FCC). Energous intends to design the technology that operates in a frequency band similar to those used in Wi-Fi router. The FCC grants product approval if human exposure to radio frequency emission is below specified thresholds. Energous received initial approval for near field charging technology in 2016. There is no guarantee that additional FCC approval is necessary to commercialize their products. FCC approval could be costly and time consuming which would make their business operations more difficult to continue. If manufactures of these products are unable to receive required approvals in timely and cost-efficient manner, the technology may be used less often and our business and operating results could be materially harmed. The cost of compliance with new laws or regulations governing their technology could adversely affect their revenues and financial results. Any new laws or regulations could impose restrictions or further obligations on Energous. These regulations could cause Energous to have to redesign their product, leading to increased costs.

Terms of Development and License Agreement: Energous entered into a Development and License Agreement with a tier-one consumer electronics company to embed the WattUp wire-free charging receiver and transmitter technology in various products, including mobile consumer electronics and related accessories. This agreement provides Energous with a potential strategic partner a time-to market advantage during the development and until one year after the first customer shipment for specified consumer WattUp-enabled products. This may prevent other potential licensees of their technology from doing business with Energous or may cause them to seek solution from other companies, which could have a negative impact on revenue and financial results.

Market Acceptance: Energous has not yet release a wireless transmitter to the market, so they have yet to prove their product line at profit worthy. Acceptance of a wire-free charging system as a preferred method to recharge low-power fixed and mobile devices will be crucial to Energous continues success. Consumers and commercial customers will not begin to use or increase the use of their product or incorporating the use of their technology unless they agree that the convenience of the wire-free charging solutions would be worth the additional expense of purchasing their products. Consumers also have to believe that the price of the products incorporating the technology relative to other products is worth it. If they are unable to prove the validity and safety of their products, the revenue will be significantly harmed.

Rapid Technological Change and Increase of Competitors: The consumer and commercial

electronics industry in general ids subject to intense competition and rapid evolving technology. Products incorporating Energous technology are expected d to have long development cycles, which gives Energous an upper hand and can anticipate changes in the marketplace and the direction of the technological innovation and consumer demands. There is also a risk, since Energous has such a small Market Cap, that their competitors has greater resources and may be better at establishing themselves in the market place.

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Patents Infringement and Property Lawsuits: Energous’ industry is characterized by competing intellectual property, and there is a change Energous will get involved in litigation based on claims that they have violated the intellectual property right of others. This is not only specific to Energous, but every company in their industry in subjected to this risk. Due to the vast number of patents application and patents issued in this technical area, third parties could assert the over Energous’ intellectual property, therefore causing a lawsuit. As the number of competitors in the market for wire-free power and alternative recharging solutions increases, and as the number of patents issued in this area grows, the possibility of patent infringement claims against Energous may increases. Some competitors may be able to sustain the costs of complex and timely patent litigations more effectively than others.

Recommendation

We recommend that Stetson University buy 4,705 shares of Energous. Based on our valuation our fair value price is $17, it is undervalued by 46%. Energous is set to be an industry leader with game changing technology, allowing small consumer devices to be charged within a 15-feet radius of a transmitter. They are creating a virtual monopoly by being the only RF wireless charging company to gain FCC approval. Their projected revenue prove that this is a high growth company, they are expected to grow from their current 1.25 million to 700 million in the next three years.  Finally, they will either take over the market entirely, or be a perfect takeover target because they are a pure play company specializing and owning the intellectual property that makes their products unique.

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