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It’s a big couple of days for the Internet of Things (IoT) product manufacturer Focus Universal (FCUV). The company started trading on the Nasdaq on August 31, post which its shares soared, closing 285.6% above its offer price of $5, on September 1.
However, this kind of stock jump is typical for the first trading day of technology stocks, and it is yet to be seen how the company’s upcoming in-house products fare in the market. Thus, I have a neutral stance on the stock.
Focusing a Bit on Focus Universal’s Offerings
Chip integration, fast 5G ultra-narrowband technology, power line communication (PLC) technologies, and User Interface Machine auto-generation are the company’s primary offerings, and it seeks to commercialize its in-house products based on these technologies through its IPO.
The company’s star offering —the Universal Smart Instrumentation Platform (USIP)— helps mobile devices or personal computers communicate remotely with smart devices. It has a promising pipeline of smart home products like carbon monoxide monitors, motion detectors, flood detectors, doorbells, and security cameras, expected to be launched in the current quarter.
Its Ultra-Narrowband Power Line Communication (PLC) is a patented technology that allows data transfers over existing power cables, eliminating the cost for a dedicated wiring infrastructure.
Financial Health and Growth Prospects
In 2019, Focus Universal acquired design and installation provider AVX Design and Integration, to better serve the high-performance Audio Visual, Home Theater, Lighting Control, Automation and Integration sectors. The acquisition proved to be accretive to the company’s top line, bringing in $218,597 of additional annual revenues as of December 31, 2020.
Notably, during the first half of 2021, the company’s gross margin expanded 32.4%, and operating expenses reduced 12%, as compared with the first half of last year. However, the company has yet to attain profitable operations.
Focus Universal’s business model looks encouraging, with its hardware and software technologies serving the high-growth sectors like IoT, Industrial IoT (IIoT) and 5G. The IIoT market itself is expected to become a $106.1 billion industry by 2026, according to the research firm MarketsandMarkets.
Moreover, research firm Fortune Business Insights estimates the global IoT market will hit a whopping $1,854.8 billion in 2028, witnessing a CAGR of 25.4% between 2021 and 2028. Similarly, per Allied Market Research, the global 5G technology market is projected to reach $667.90 billion by 2026, growing at 122.3% CAGR from 2021 to 2026.
These predictions are encouraging for Focus Universal, which stands to benefit immensely from these markets if its pipeline products hit it off as well as its patented technologies.
Can Focus Withstand Competition?
Nonetheless, the pressure of intense competition that characterizes a growing industry cannot be overlooked. Attracted by the bright prospects of 5G and IoT, numerous new players, some even having greater financial resources than Focus Universal, are entering the market frequently.
Companies like Hanna Instruments, Extech Instruments, or Monnit Corporation offer significant competition to Focus Universal in the sensor node industry.
Nonetheless, Focus Universal is technologically very strong. Its Device-on-chip (DOC) technology, which integrates the electronic circuits of various integrated circuit components onto a chip, is expected to enable faster time-to-market for its products than its competitors’ multi-chip devices at a lower cost.
Moreover, the IoT and 5G markets are undergoing astronomical expansion and likely have room for growth for all the companies that serve them.
News Sentiment for Focus Universal is currently Neutral, based on 3 articles over the past seven days. All the articles have Bullish sentiment, compared to a sector average of 62%, and none have Bearish Sentiment, compared to a sector average of 38%.
As a new member of the exchange, it will be interesting to learn Wall Street analysts’ take on the company.
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