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Follow-up to February 6th, 2017 report on SCON.
The original report can be viewed here- https://finance.yahoo.com/news/superconductor-technologies-potential-revolutionize-smart-130000844.html
Superconductor Technologies Inc. (NASDAQ: SCON) is engaged into superconducting innovation. Its Conductus® superconducting wire platform offers high performance, cost-effective and scalable superconducting wire.
The company recently announced its 4th quarter revenue; Scon’s fourth quarter 2016 net revenues were $9,000, compared to $22,000 in the third quarter of 2016 and $27,000 in the fourth quarter of 2015. Revenue for all periods was primarily from legacy wireless products. Net loss for the fourth quarter 2016 was $2.5 million, or a loss of $0.61 per basic and diluted share.
The performance was largely in line with our previous expectations of minimal revenues and an EPS loss, as the company continued to develop manufacturing capability to serve the power sector.
During 2016, SCON designed and implemented performance improvements to its flagship product i.e. Conductus® HTS wire. In fact, it also attained a 20% increase in critical current carrying capacity on its new wire architecture. Additionally, in late February, Scon’s internal testing, delivered results that met specifications for several potential customers. As a result, it recently shipped wire to key customers for final qualification.
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Notwithstanding recent muted performance, company is aggressively focusing on attaining final customer approval for one or more applications. In 2017, SCON plans to fulfill existing qualification orders that include three new orders received in the fourth quarter, and ramp production for commercial scale orders.
Additionally, In February 2017, Scon was awarded two patents that protect its unique HTS wire manufacturing capabilities. This invention enables Scon to efficiently monitor the evaporation conditions of multiple source materials used in the vacuum deposition chamber. Moreover, these patents also reinforce the sustainable production advantages of Scon’s HTS wire manufacturing process.
The recent industry and government support for HTS wire manufacturing initiatives confirm the importance of this key enabling technology to surpass the performance limitations of conventional materials and designs.
The company’s stock is on a modest growth path after these positive developments over the past few months about its prospects. In fact, as of our initial coverage during Feb’2017, it was trading at $1.16 and has steadily increased to the levels of $1.6 on March 27th 2017.
About the Company:
SCON is attempting to develop and produce High Temperature Superconductor, or HTS, wire that bears the potential to revolutionize the electric power industry. The properties of HTS allow wire to conduct electricity more efficiently from traditional copper wire through cooling power transmission to “critical” temperatures. SCON markets its patented HTS technology under the brand name Conductus.
Since its inception in 1987, SCON pioneered the development of superconducting materials and manufacturing processes, developing numerous patents as well as proprietary trade secrets and know-how. Now, it is applying its proven and proprietary superconducting deposition techniques and manufacturing experience to the development of cost effective, high performance superconducting wire for emerging large market opportunities with electric utilities and smart grid applications.
Timeline of the company:
Unique differentiating factors & key Off-take drivers:
Scon is one of the few companies, who are bidding for large customers such as General Electric (NYSE: GE), Siemens (OTC: SIEGY), and TECO Westinghouse, a subsidiary of Taiwan Electric (Taipei: 1504 TT). These makers of electrical transmission and generation equipment view great potential in the use of HTS.
Specifically, HTS has the potential to revolutionize the Smart Grid market of generating and transmitting electricity in the United States. Potential benefits could include improving grid reliability by reducing outages, enabling new renewable energy sources through greater network interconnection, and renewing the grid to adapt to growing power demand.
Future applications of HTS technology could also include medical imaging devices as well as next generation power equipment particularly used in electricity generation and distribution. SCON estimates that potential demand over the next 3 years could easily sell out its potential initial production capacity (which could be grown 5x, but still a shortfall to estimated industry demand).
Recent announcements:
During February 2017, Scon was awarded two patents that protect the company’s unique HTS wire manufacturing capabilities. One addresses the ability to incorporate pinning into the superconductor without using additional elements. Since pinning is necessary to improve a superconductor’s performance in a high magnetic field, Scon’s intrinsic pinning method is a key advantage for enabling the high performance wire needed for next-generation motors, generators, MRI and NMR machines.
The second patent protects Scon’s automated machine architecture utilized within the Reactive Co-evaporation (RCE) chamber of its wire manufacturing system. Scon’s invention enables improved cycle time, higher throughput, and lower costs compared to other methods.
During November Scon was selected by the U.S. Department of Energy’s (DOE) Office for its Next Generation Electric Machines (NGEM) program in collaboration with industry partner TECO Westinghouse Motor Company (TWMC). The NGEM program’s objective is to bring about more rapid development of enabling technology for superconductive industrial motors used in manufacturing.
Scon is the prime recipient of the $4.5 million award under the DOE’s broad goal of advancing American manufacturing competitiveness by improving industrial motor efficiency to significantly reduce energy usage and the cost of operation.
Key risk factors and potential stock drivers:
Some key controversies that might govern future stock price performance include:
- The company’s future prospects are significantly dependent on the meaningful commercialization and market acceptance of its Conductus wire products. Scon still do not have customers buying significant amounts of its wire products on an ongoing basis. Moreover, previous revenue was significantly concentrated to few customers. Therefore, its ability to successfully gain market share while diversifying its customer base, is critical for its business risk profile.
- The company’s business model is plagued by slow transformation and extremely high lead-time. Notwithstanding its recent progress, Scon’s ongoing development efforts can take significant number of years to commercialize, and it must overcome significant technical barriers and deal with other significant risks.
- The company’s sub-optimal liquidity continues to impinge its financial flexibility. Therefore, it may need to raise additional capital on a continuous basis. If the company is unable to raise capital in a timely manner, its ability to implement current business plan and ultimately its viability as a company could be adversely affected. Moreover, additional equity would also lead to significant dilution in its existing shares.
Earnings Review:
Scon’s fourth quarter 2016 net revenues were $9,000, compared to $22,000 in the third quarter of 2016 and $27,000 in the fourth quarter of 2015. Revenue for all periods was primarily from legacy wireless products.
Profitability:
Net loss for the fourth quarter 2016 was $2.5 million, or a loss of $0.61 per basic and diluted share, compared to a net loss of $2.9 million, or a loss of $0.93 per basic and diluted share, in the third quarter of 2016, and a net loss of $2.4 million, or a loss of $1.23 per basic and diluted share in the fourth quarter of 2015.
Cash Flow & Balance Sheet:
As of December 31, 2016, Scon had $10.5 million in cash and cash equivalents. On Dec.14, 2016, Scon closed a public offering with gross proceeds of $10.3 million.
Stock Performance:
On Wednesday, March 29th, 2017, SCON shares declined by 3.7% to $1.28 on an average volume of 1.81 million shares exchanging hands. Market capitalization is $5.61 million. The current RSI is 60.61
In the past 52 weeks, shares of SCON have traded as low as $1.04 and as high as $4.50.
At $1.28, shares of SCON are trading above their 50-day moving above their average (MA) at $1.19 and below their 200-day MA at $2.02.
The present support and resistance levels for the stock are at $1.2 & $1.52 respectively.
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February 6th, 2017- (NASDAQ: SCON) opened at $1.12/share hit a high of $1.80/share within 10 days our member potential gains- 60% – http://finance.yahoo.com/news/superconductor-technologies-potential-revolutionize-smart-130000844.html
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