Vuzix Corporation (VUZI) is a company I know well and have followed closely for two years, (recommended at closing price of $4.21 in January 2015).
I believe 2017 will be the company’s breakout year in for both revenue generation and share price appreciation.
This article will look at the market for augmented reality, (AR), the leading edge AR products Vuzix is launching, competitors in the AR space, why VUZI shares have underperformed in the last few months, and why shares are now on the verge of a rebound.
At a glance:
Vuzix Corporation (NasdaqCM: VUZI)
Shares outstanding: 19.6 million
Insider & institutional ownership: 33%
Public float: 14.3 million
Shares shorted: 3 million, or ~ 25% of float
Closing Price 2/3/2017: $6.15
Market Capitalization: $120 million
Current Ratio: 2.5
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Vuzix Corporation (web site) is a leading supplier of Smart-Glasses, Augmented Reality (AR) and Virtual Reality (VR) technologies and products for the consumer and enterprise markets. The Company’s products include personal display and wearable computing devices that offer users a portable high quality viewing experience, provide solutions for mobility, wearable displays and virtual and augmented reality. Vuzix holds 49 patents and 43 additional patents pending and numerous IP licenses in the Video Eyewear field. The Company has won Consumer Electronics Show (or CES) awards for innovation for the years 2005 to 2017 and several wireless technology innovation awards among others. Founded in 1997, Vuzix has offices in Rochester, NY; Oxford, UK; and Tokyo, Japan.
The Augmented and Virtual Reality Market
Augmented Reality (AR) superimposes graphics, audio and other sensory enhancements over a real-world environment in real time, and blurs the line between what’s real and what’s computer-generated by enhancing what we see, hear, feel and smell. Virtual Reality (VR) in comparison, generates realistic images, sounds and other sensations that replicate a real environment, fully immersing the user in that environment. For a concise overview of the differences between AR and VR technologies, check out “Virtual vs. Augmented Reality” on Augment.com.
The market for AR is expected to catapult to $117.4 billion by 2022, at a CAGR of 75.72% between 2016 and 2022. The future of the VR market is smaller, and is expected to reach $33.9 billion by 2022 at a CAGR of 57.84% between 2016-2022 according to research from MarketsandMarkets.
Tim Merel, a leading AR/VR market expert spoke with Bloomberg in November, and estimates the ability of AR to disrupt smartphones and tablets will reach an inflection point by 2018, and that by the middle of the next decade, AR will actually cannibalize smartphones. I can say that I would not have believed that AR glasses could one day replace my much-loved iPhone 7S…but having recently tried on a working pair of Vuzix Blade 3000 glasses, I think the possibility is very, very real.
Vuzix has products in the both the VR and AR space, but it’s AR that I believe will be game-changing for VUZI in 2017, based on the Blade 3000 AR glasses the company is about to launch vs. what the competition has to offer.
Vuzix Blade 3000: Wearable Computing That Looks Great
Vuzix has a huge competitive advantage as the company rolls out the Blade 3000 series of AR glasses in the second half of this year. That advantage is the Company’s heavily patented, advanced waveguide technology that provides best in market functionality in a set of glasses that are actually stylish and can be worn comfortably all day long. While no firm pricing is available yet, the Vuzix Blade 3000 is expected to begin selling somewhere under $1,000.
I had the pleasure of test driving a working pair of the Vuzix Blade 3000 AR glasses two weeks ago and was thoroughly impressed with the vibrancy and clarity of the display, the best-in-class functionality, and the stylish looks. The glasses were surprisingly light weight and were as comfortable as my regular reading glasses. And in case you’re wondering, Vuzix can easily put your own prescription inserts into the Blade 3000 for a nominal charge.
A tiny projector embedded in the Blade 3000’s side powers a display affixed to the right lens, driven by a quad-core Intel Atom processor. An internal 64GB storage module (expandable via MicroSD card) files away the Blade 3000’s software and apps, and a Bluetooth 4.1 chip provides connectivity. Myriad sensors, meanwhile, track the wearer’s gaze and location. The Blade 3000 sports a built-in GPS and directional sensors including a gyroscope, accelerometer, and hull sensors. And a touchpad, replete with haptic feedback in the form of vibration, handles navigation, as does a built-in noise-canceling mic capable of voice recognition.
Blade 3000 Specifications
Optics and Electronics
- Waveguide based see through optics
- Cobra II DLP based display
- Right eye monocular
- Quad Core ARM CPU
- 8 Megapixel camera with 1080p video
- Android 5 OS
Voice control – multilingual
- Touch pad with gesture
- Head motion trackers
- Haptic vibration alerts
- Remote control app for Android & iOS device
- Micro USB ear-phone jack
- Full BT functionality
- Noise canceling microphone Battery
- Internal LiPo rechargeable batteries
Versatile Eyeglass Options Available
- Prescription inserts
- Multiple lens color choice
- All lenses standard with UV protection
- MicroSD expansion slot
- Wi-Fi and BT wireless
- Micro USB
With this best in class functionality using ultra-thin 2.0 mm glass and good looks, it’s not surprising that the Blade 3000 won four CES 2017 Innovation Awards in the categories of Computer Accessories Product, Gaming Product, Virtual Reality Product, and Wireless Handset Accessories Product.
Here’s a look at the 3000 Series at CES 2017:
What do competitors have in the AR space? Nothing that comes close to the Vuzix Blade 3000 in either functionality or style.
Ask yourself, which AR glasses you would choose when comparing the competitors below, and you’ll see why the Blade 3000 will be a game-changer for Vuzix Corporation when deliveries begin this year.
Large Short Position + Increasing Institutional Participation + Strong Demand Following (delayed) M300 Launch = BUY
Over the last 3 months, VUZI shares have drifted lower on low volume while 25% of the trading float has been shorted.
I’ve shorted many stocks myself over the years, and I understand why shorts have jumped on VUZI shares: There was a delay in launching the company’s M300 glasses last year due to design validation testing and manufacturing delays that weighed heavily on the Company’s Q3 results. Such is the nature of cutting edge technology, and VUZI shares have paid the price. However, M300 shipments have now begun, and according to CEO Paul Travers, demand is strong:
“As it currently stands, the 2017 sales demand pipeline is very strong for the M300 and although I cannot share specifics here, I can say that demand is significantly greater than it was for the M100 upon launch. The application and developer ecosystem we have now didn’t exist for the M100 and as a result we’re starting added gates with more orders for long shipments. We are also in discussion with companies with potential needs ranging from hundreds of units, in some case tens of thousands of units.”
CEO Paul Travers from Q3 conference call transcript.
At the same time shorts increased their positions following the Q3 results, institutional participation in the company has actually increased, albeit modestly.
Timing IS Everything
Given the current level of support in the low $6 range, this looks like a great time to start of add to a position in Vuzix Corporation for the following reasons:
- Large short position has taken shares to support levels in low $6 range. Any substantive, positive news from the Company will cause shorts to exit in order to maximize their profitable positions
- M300 glasses now in full launch with “very strong demand” that is “significantly stronger than the M100 upon launch” per CEO, Paul Travers. Look for improving financials as a result.
- M3000 glasses on track for launch this year are something the AR market has been dreaming of- ultra high performance wearable computing that actually looks great
- Recent institutional participation shows a moderate increase, which may also accelerate now since the reconstituted LD Micro Index from 2/1/2017 also includes VUZI
VUZIX was a strong performer when the news flow was positive in the summer of 2016 and, (unsurprisingly), has underperformed due to the M300 launch delay.
My original recommendation for VUZI was 2 years ago at $4.21 and shares more than doubled to $9.69 in September of last year.
Expect the current downtrend in VUZI shares to reverse when the company is running on all cylinders again, which…. is right…..about now.
Vuzix January 2017 Investor Presentation
Barron’s: In Vuzix Vs. ODG AR Battle, Edge Goes to Vuzix in Consumer Style
Review: Vuzix Blade 3000 smart glasses hands-on: Spectacles’ less-dorky cousin
Video: Vuzix Flight Test & Drone Show at CES 2017
Video: Vuzix (VUZI) Hits CES 2017 With Strong Balance Sheet and Solid Product Lineup
Best wishes for profitable investing,
Disclosure: I am long shares of Vuzix Corporation. I have not been paid in any form by any company or third party for this article.