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Vuzix - Putting On Bull Horns For A Trade

|About: Vuzix Corporation (VUZI)
Summary

My long term opinon notwithstanding I see big upside potential for the value of Vuzix shares over the short to medium term from current levels.

While my longer term view remains bearish I am now putting on some bull horns.

The herd might be wrong most of the time, but you're better off running with herd than getting stampeded at least in the short term.

Up Front Disclosure

I will include a more detailed disclosing statement at the end however please realize that I have a long positon in Vuzix, as such anything I write should be considered as having bias.  

Why The Change of Heart?

All the loyal readers of this pathetic and miserable little instablog (yes all three of you) might be a bit surprised that I've taken out a position on the long side with Vuzix given all the negative opinon I've expressed here and on various social media sites over the past 2+ years.  

The way I see it there's a train coming.  It might not be the fastest train, and the engine might be breaking down, but in my opinion its coming none the less.  The way I see it there are three choices: 

  • Continue with having no position and watch the train go chugging by.
  • Play Vuzix short or buy puts and get run over
  • Climb on board and enjoy the ride

I've opted for the last of those three choices, I've climbed on board by buying shares. My opinion could be wrong of course, the train could break down and shares of (VUZI) could continue making new lows, but I'm thinking that won't be happening for a while.  

Back in November of last year I wrote a blog post here entitled:

Can Vuzix Survive

In that posting I expressed the view that survival is something that's in this company's DNA.  At the time however I didn't think it would be pretty, I thought there was a good chance that something like Convertible Debentures would be issued to refill the company's rapidly depleting coffers.  

My opinion started coming around to the bullish side with news of a shelf offering for up to $100,000,000 worth of securities: S3 Filing 

They say desperate times call for desperate measures.  Calling Vuzix's situation desperate might seem a bit overdone, but with only about $10 million in cash and equivalents remaining as of the most recent 10Q filing up to March 31st, I don't think its that much of a stretch. 

Over the past year the company has been losing close to $2 million per month.  If one assumes losses of that magnitude have continued into April, May and June 2019 that would mean that cash would be getting down to somewhere around $5 million or less by the time the calendar turns from June to July. 

There's Nothing Like a Rising Share Price to Excite the Herd

Vuzix has a long history of some pretty wild price swings, both up and down.  From January of 2018 to the present the overall trend has been decidedly lower.  But back in January 2018 the PPS spiked over $11 for a time, as investors poured in.  That spike was the result of numerous media reports about Vuzix's Blade product and the integration of Amazon's Alexa Assistant in my opinion.  

Stocks ride on emotion in my view, and nothing gets the herd more excited than bullish sounding news and a rising share price.  I see numerous possibilities for news over the coming days and weeks that could help get the sheep excited about Vuzix once again, with a rising share price acting as confirmation for a bullish view.

Back in January of 2015 Intel partnered with Vuzix and invested almost $25 million in the company.  While that partnership was later dissolved, Intel's investment and a 1 for 75 share consolidation helped propel Vuzix off the OTC and onto the Nasdaq.

I could see something similar happening with any of Verizon, Eaton or Plessey, or perhaps even a combination of all three.  Even if things fizzle the way they did with Intel, in the near term I could see such news propelling shares of VUZI to big gains.

Beyond that there is always the possibility of news attached to some other big name or names.  Vuzix has a long history of touting relationships with some big players like DHL, SAP, H-E-B, Wounded Warrior and several others.  Even though none of those relationships have done much for the company's bottom line, investors are often willing to look past previous failures in hopes of future success.

All it takes I believe is a rising share price, in my view there are a lot of investors who fixate on the PPS and if they see it climbing then they believe the future has to be bright. 

Full Disclosure

I currently have a long position in Vuzix. I wrote this blog posting myself and it reflects my honest opinions. I am not a registered investor advisor or professional and hold no current designations, so view this article as being for entertainment purposes only and verify any and all information posted.

I received nothing for the writing of this blog posting, not from Seeking Alpha or any other source, I do not accept payment for any of my writing on stocks.  This is simply my honest views.  

Disclosure: I am/we are long VUZI.