- WiMi Hologram Cloud went public in April 2020, raising $26.1 million in gross proceeds from a U.S. IPO.
- The firm provides an augmented reality optimized platform for AR/Metaverse providers in China.
- WIMI has grown quickly in 1H 2021 but the stock continues to languish; my outlook is Neutral given regulatory uncertainties.
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A Quick Take On WiMi Hologram Cloud
The firm has developed a holographic augmented reality platform for solution providers in China.
WIMI has produced strong growth and is positioned in a growing industry of 'metaverse' offerings, but faces Chinese regulatory uncertainties.
My outlook for the stock is Neutral for the short-term.
Beijing, China-based WiMi Hologram was founded in 2015 to develop AR-based holographic advertising services and entertainment products.
Management is headed by CEO and Director Fanhua Meng, who has been with the firm since its inception and was previously General Manager at Beijing Tonglian Tiandi Technology.
WiMi has developed an online holographic AR advertising solution that embeds holographic AR ads into movies and shows by analyzing the underlying video footage at a pixel level to identify ad spaces that can be augmented by 3D objects.
The technology accepts signals through application programming interfaces [APIs] integrated with the company's systems, consisting of the buyer's target audience, budgets as well as the 3D models to be embedded in the videos.
According to a MarketWatch publication, WIMI is 'the leading AI holographic vision company in China' that has developed 'the third-generation 6D light field holographic technology product' with a simulation degree of over 98% that 'takes the users' breath away in astonishment.'
Additionally, management claims that the company's algorithm is superior as "most peer companies may identify and capture 40 to 50 blocks of image data within a specific space unit, [while] the number of data blocks [WIMI] can collect reaches 500 to 550," or about 80% faster than the industry average, 'according to Frost & Sullivan.'
The company's holographic services and products consist of mobile app payment middleware software, a game distribution platform and holographic mixed reality [MR] software.
WiMi acquires customers primarily through its sales and marketing team, which is tasked with making direct office visits, attending conferences and industry exhibitions, as well as word-of-mouth referrals.
According to a 2019 market research report by the International Data Corporation, the China Virtual Reality [VR] and AR market is projected to reach $6.53 billion in 2019 and $65.2 billion in 2023, growing at a CAGR of 84.6% between 2018 and 2023 as compared to CAGR of 78.3% for the global market during the same period.
The training, retail showcasing and industrial maintenance segments hold the largest three spots in terms of commercial applications of VR and AR while VR games, AR games and VR videos take up the top three spots in terms of consumer spending, which is projected to account for $9.59 billion by 2023.
WiMi's Recent Performance
Topline revenue by quarter has grown markedly year over year in Q2 2021:
Gross profit by quarter has risen sharply:
Operating income by quarter swung back into positive territory in the first half of 2021:
Earnings per share (Diluted) have also turned positive in 1H 2021:
(Source data for above charts)
Below is a table of relevant capitalization and valuation figures for the company:
Price / Sales
Enterprise Value / Sales
Enterprise Value / EBITDA
Revenue Growth Rate [TTM]
Earnings Per Share
Commentary On WIMI
In its last earnings announcement, covering the first half of 2021's results, management highlighted its previous investment in developing 'smart chips' to optimize performance for its offerings.
For 1H 2021, CEO Shi touted that over 53% of its revenue came from its semiconductor business as a result of that smart chip investment strategy.
Additionally, the firm grew its customer base from 175 to 298, a 70% increase.
As to its financial results, operating revenue increased by more than 200% versus 1H in 2020 and gross profit grew by nearly 190%.
However, the company has prioritized its R&D investment program, which increased in the first half of 2021 by approximately 464% year-over-year.
Regarding valuation, it is difficult to determine a comparable valuation due to the company's niche positioning in a nascent market.
The primary risk to the company's stock price outlook is continued negative perceptions of Chinese companies that operate in the technology space due to Chinese government moves to limit their exposure to U.S. markets.
High profile delistings of major Chinese technology companies serve to weigh negatively on the stocks of much smaller firms.
If it weren't for the regulatory risks, my estimated is that WIMI would be a better performer, especially since Facebook (now Meta) rebranded and increased its focus on metaverse services.
Given that cloudy picture, despite WIMI's growth trajectory and turn to slight profit, my outlook on the stock is NEUTRAL.
This article was written by
Donovan Jones is a research specialist with 15 years of experience identifying opportunities for IPOs and software companies.
He also leads the investing group
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