QuickLogic Corporation QUIK recently enhanced balance-sheet strength by amending its revolving credit facility agreement with Heritage Bank of Commerce.
Per the latest terms of the loan and security deal, QuickLogic increased the total revolving credit capacity by $6 million to reach a total of $15 million.
Backed by the raised facility, QuickLogic is likely to enhance its innovation-driven QuickAI platform with robust functionalities. Further, the management anticipates benefiting from the improved flexibility to strengthen the company’s intellectual property (IP) design goals.
Notably, the maturity of the credit facility is due on Sep 28, 2020. This credit facility will also be utilized by QuickLogic for working capital and other general corporate purposes.
What Investors Should Know?
Following the news, shares of QuickLogic increased 7.2%, with the stock price closing at approximately 76 cents in the last trading session. Year to date, QuikLogic stock has lost 56.3% compared with industry’s 5.5% decline.
The company is benefiting from increasing adoption of QuickLogic’s sensor processing solutions and embedded FPGA (eFPGA) IP Licensing solutions. Strength in the latest endpoint AI platform is an added positive.
Notably, QuickLogic exited the third quarter of fiscal 2018 (ending Sep 30, 2018) with cash and cash equivalents of $24.22 million compared with $22.8 million registered in the previous quarter. Moreover, the company has no long-term debt.
We believe the revised facility will help the company to boost its balance sheet and utilize the resources to expand relationships with prospective customers, which will eventually lead to design wins.
Meanwhile, QuickLogic’s strength in smartphone marketand increasing demand for wearable products in the B2B market bode well. Furthermore, the company is working with a Japanese smartphone OEM, which is expected to adopt QuickLogic’s EOS S3 SoC for its new models scheduled to be launched in 2020.
However, stiff competition from notable eFPGA chip makers, including Intel INTC and consolidating semiconductor market, is concerning. Also, QuickLogic’s eFPGA and SoC development as well as enhancement efforts for sustaining in the competitive market are leading to higher capital expenditures, which remain an overhang on margin expansion.
Zacks Rank & Stocks to Consider
QuickLogic currently carries a Zacks Rank #4 (Sell), which might change given the latest positive development.
Upland Software UPLD and Alteryx, Inc. AYX are better-ranked stocks worth considering in the broader technology sector. Both the stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term earnings growth rate for Upland Software and Alteryx is currently pegged at 20% and 8%, respectively.
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