Vuzix Corp (NASDAQ:VUZI) had a great start to 2018. The company ran from $6.30 a share on January 2 to $10.80 on January 24 – a more than 71% run in a three-week period. Towards the end of last week, an equity raise announcement has induced a correction, pushing Vuzix shares down to current levels in and around $8.65.
There’s a strong chance, however, that this dip will prove nothing more than a temporary correction against a much longer-term upside revaluation.
First up, for anyone new to Vuzix, the company is a technology play that’s focused primarily on the design, development and sale of wearable display devices. Specifically, Vuzix creates and sells smart glasses type devices rooted in augmented reality (AR) technology. Some may be familiar with this one on the back of a recent product launch at 2018 CES in Las Vegas, Nevada, which took place on January 9-12 in the Las Vegas Convention Center, and during which the company unveiled its Alexa-enabled Vuzix Blade AR Smart Sunglasses.
This launch has drawn considerable fanfare and the device was actually named best AR technology at the event by TechRadar but, for the purposes of this discussion, that’s all we’re going to say about Blade.
Why? Because while Blade might be attracting a considerable amount of consumer attention and, at the same time, drumming up a lot of hype for the technology, there’s another device that Vuzix developed and sells that we see as being the real driver behind the company’s push towards profitability over the coming two to three years.
That device is the M300.
Just as with the Blade, the M300 is a smart glasses, wearable-type device that rests on AR technology and is designed to integrate with an Android operating system so as to overlay certain images and information within the wearer’s field of vision.
Unlike Blade, however, which is primarily designed as an individual consumer device, the M300 smart glasses are designed to fill a gap in the global enterprise market for this sort of technology.
By 2024, analysts expect the AR industry to be worth $50 billion – up 75% since 2017. The vast majority of this market (80% plus) will be rooted in enterprise sales, meaning devices and technology sold to companies and designed to improve certain aspects of the company in question’s operational activity.
Industries such as retail, automotive and medical are leveraging the potential of the technology to enhance operational efficiency and Vuzix, with its M300 device, is perfectly positioned to take advantage of this trend.
On January 23, the company announced the successful completion of a pilot program with H-E-B, one of the 15 largest retailers in the US. The program, which combined the hardware with what the company calls its Vuzix Basics Video (VBV) solution, provided an out of the box solution to HEB that afforded works at the company’s manufacturing plant the opportunity to work at an increased efficiency, providing them with the right data at the right time, while allowing them to work hands free.
Here’s what Greg Flickinger, Group VP of Manufacturing Operations at HE-B, said on completion of the program:
“The ability to leverage augmented reality on the plant floor will open the door to a game changing approach to technical education and knowledge transfer. We’ve really just started to scratch the surface of all the ways we can drive value with the Vuzix M300 in our operations.”
This is a company that does approximately $24 billion in revenue and operates more than 360 stores in a number of formats, including superstores, supermarkets and gourmet markets. It’s the largest private company in Texas and one of the 15 largest privately held companies in the US.
But what’s important to recognize here is that this is just one of a large number of programs of this type, each of which has the potential to launch the M300 device into a multinational organization’s network of manufacturing or warehouse type facilities.
The company announced on December 27, for example, that it had expanded its sales footprint in the Biopharmaceutical industry by way of recent M300 Smart Glasses deliveries to a major Fortune-100 pharmaceutical company. In line with the development, the M300 will be deployed across 4 continents through numerous use cases including research and development, manufacturing, and logistics.
The bottom line is this: as this industry expands in line with the above-mentioned analyst forecasts, the demand for technology that can increase efficiency and workflow in hands-on-type environments is going to need satiating. Of those companies positioned to meet the demand, none have proven the effectiveness and flexibility of their technology to the degree that Vuzix has with its flagship M300 hardware.