Leading up to the Kopin (NASDAQ:KOPN) Q4 call, I was expecting 2015 guidance which would validate my Revenue and Earnings assumptions as published here but it appears management would like to confirm customer orders prior to revealing the true magnitude of what they have accomplished. Translation: 2015 will be a pivotal year for Kopin with confirmation of significant growth 2016 forward.
On the Q4 call, we did learn a few very important things about 2015 which I will briefly summarize below:
- Due to the fact that they were a 10% customer in 2014, it was disclosed that Google (NASDAQ:GOOG) has been working with Kopin on wearable technology. It appears displays have been developed by Kopin specifically for, and funded by, Google. Based on this, I predict that we will see Kopin display technology in the production version of Glass. Himax (NASDAQ:HIMX) displays may have been included in the beta Explorer version, but I believe Kopin's superior display technology will be designed-in to the full production version. This is a huge win for Kopin.
- There is another (almost) 10% customer of Kopin's wearable technology which remains nameless as they did not meet the requirements for disclosure.
- On top of the two customers noted above, there are two additional Tier One customers who will be launching enterprise headsets with significant Kopin content this year. "Significant Kopin content" may very well mean: optical engine/speech enhancement/software/OS/reference design license revenue.
- Revenue from the Tier One customers is expected to be booked beginning in the second half of 2015. Production of these customer displays has already occurred for qualification units.
In addition to this new business, I would remind you that Kopin is currently designed-in to the following shipping head-worn wearables as of March 2015:
- Vuzix M100
- Recon Instruments Snow2 goggle
- Recon Instruments Jet athletic eyewear (shipping pre-orders this month)
- Oakley Airwave goggle
- Zebra/Motorola Solutions HC1 enterprise headset
Regarding the nascent enterprise segment, a quote from Dr. Fan, CEO of Kopin, on the call:
" ... I think we are basically in almost every major enterprise application headset."
Head worn wearable technology adoption will occur in the enterprise segment first. It is now obvious that Kopin has positioned itself to dominate in this area with the Golden-i platform. With clear signals that Kopin is emerging as the key optical engine and IP supplier to multiple headset customers I added to my position this week.
I stand by my intrinsic value estimate of $4.50/share based on Kopin's cash position and licensable patent portfolio. The closing price of $3.69/share on March 19, 2015, represents a relative bargain when you consider Kopin's growth prospects.
I continue to be long Kopin and expect an upward revision in 2015 Revenue and Earnings guidance soon. I have begun to revise my financial model to account for the phasing shift of front loading enterprise vs. consumer headset adoption. Once completed, I will publish my own updated estimates 2016 forward.
Disclosure: The author is long KOPN.