It's not often you'll come across a stock that has risen
roughly 200% in the past year and is still valued at less than
six times projected 2014 profits. Equally impressive: Those
profits are expected to come on the heels of 450% revenue
Sounds too good to be true? It quite likely is.
Yet those are the heady numbers swirling around technology
Uni-Pixel (Nasdaq: UNXL)
Here's another stat to ponder: More than 40% of the trading
float of this stock is held by short sellers. There are a whole
lot of investors that think the entire company is a sham. And
unless the company can soon point to tangible progress, then
short sellers may reap some handsome profits as the stock tumbles
back to the single digits.
I took a deep look at Uni-Pixel's business model about four
months ago, right after shares had plunged 50% in a matter of
weeks. (I encourage you to re-read that piece before continuing,
as I'll be referencing it throughout this follow-up.) Since my
last look at the company, shares have rebounded almost 10%. But
that doesn't begin to reflect the behind-the-scenes drama that
continues to play out for this company.
The Kodak Connection
Shares of Uni-Pixel began to rebound in early August when
management discussed the company's pre-production efforts
underway at the manufacturing facilities of Eastman Kodak. (As I
noted in June, the two companies had inked an agreement in April
of this year that initially powered the stock higher before
investors grew dubious of the relationship.)
CEO Reed Killion noted in a second-quarter conference call:
"The construction in [this] build-out effort is well on track;
Kodak now has over 40 full-time Kodak employees dedicated to the
manufacturing and supply chains for UniBoss touch sensor
solutions. Our rapid progress during [the second quarter] enabled
us to receive the two printing lines and supporting equipment at
the Kodak Rochester facility around the end of June."
There was plenty of other fodder for the company's supporters
on that conference call, including presumed agreements with other
technology firms that may seek to use Uni-Pixel's technology in
their own manufacturing processes.
Still, the company had yet to actually build any products for
sale. Killion said, "We are on track to meet production-level
revenue in [the fourth quarter]," adding that "that this PC
partner wants product on a shelf of holidays. ... For us, the
drop-dead date to ship product would be ... Oct. 1."
It increasingly looks as if investors won't see any production
this year. In late September, Uni-Pixel said commercial
production trials are underway, which actually doesn't mean
anything. Ostensibly, the company has been cultivating its
production processes in a small, controlled fashion for quite a
while now, and executives would say only that it is "quickly
approaching the global market rollout of a functionally printed
Rivals are also working feverishly to build more
advanced touch-sensor screens, and if Uni-Pixel waits
much longer, a key window may have closed.
On Seeking Alpha, some bloggers have suggested that Uni-Pixel
is a complete fraud, and these apparent production delays are a
mere cover-up for the fact that production will never take place
-- that the company, in effect, has been fooling Kodak and
others, and possesses no special technological advantages.
However, there is no way to know that. To be sure, the fact
that this company keeps moving the goalposts can hardly be
assuring to its bullish supporters. But they insist that a
revenue ramp will come, even if it's pushed out to 2014.
My biggest concern is timing. Rivals are also working
feverishly to build more advanced touch-sensor screens, and if
Uni-Pixel waits much longer, a key window may have closed.
That may be a big concern for insiders as well. Since the
early August conference call, they've been quietly heading for
the exits, selling more than $2 million worth of stock. If
Uni-Pixel were really on track for stunning revenue growth, and
earnings per share (
) of more than $3 in 2014, as consensus forecasts imply, then
these insiders would have to have their heads examined.
Instead, they are cashing in, even as this stock has fallen by
half from its springtime highs.
Hefty Insider Selling
As the insiders have stepped up their sales, short sellers
seem to be taking that as a cue to build bigger positions. In
recent months, the short position has quietly moved up to 4.9
million shares, the highest level yet.
Rising Short Selling (mil. of shares)
Risks to Consider:
As an upside risk, the company continues to speak of other
partners besides Kodak, and if a key partner is named, shares
could get a bump.
Action To Take-->
Uni-Pixel will discuss third-quarter results in early November,
at which time the company will be under the gun to deliver
specific near-term revenue targets. Further delays will simply be
fodder for the shorts and likely to discourage whatever bulls are
To be sure, this company faces a potentially huge market
opportunity. And a partnership with Eastman Kodak is already more
than the short sellers would have suspected this company could
generate. Yet time is running short, and this stock, which has
bounced around the $15 to $20 trading range in recent months, may
not be able to hold up much longer if management doesn't start
delivering the goods.
© Copyright 2001-2010 StreetAuthority, LLC. All Rights Reserved.