Three analysts have increased their EPS forecasts for this IoT company in the past 30 days.
Adesto Technologies Corporation (IOTS)
From The Cutting Edge
Adesto Technologies Corporation (IOTS) provides ultra-low power memory tailored for the Internet of Technology (IoT). Ultra-low power is a key benefit because many IoT devices will be off-grid and too small in size for adequate energy storage.
Unlike your smartphone, which contains a relatively large battery you can easily recharge every day, many of the connected devices of the IoT will be in much more challenging environments for energy charging and storage.
Take a simple connected door lock for example. You can’t just move the door lock to a charger, so maybe you need to put a small PV module on the front of the unit. Solar cells can only absorb so much energy, making low-power consumption essential in ensuring the device can continue running.
Perhaps, as another example, you’re a wearable device maker like Fitbit or you’re working on a pair of smartglasses like Apple. The nature of these devices requires slim designs, which means less room for batteries and therefore a greater demand for low-power consumption. The same idea applies for medical implants such as the Eversense CGM being marketed by Roche and Senseonics.
Even more ubiquitous, though, will be wide area IoT sensor networks requiring low power solutions. The technical name for this is a “low power wide area network” or LPWAN for short. Don’t let the acronym scare you: It’s just a network of sensors that requires low power consumption.
Let’s say you’re a city looking to modernize your water system. You install thousands of sensors underground but there’s no grid. Instead of relying on batteries that you would have to replace every few months, you install an energy harvesting chip instead that produces a very small amount of power from the kinetic energy of the running water. While the amount of energy produced is extremely low, it’s just enough for a low power solution like Adesto’s.
That solution, specifically, is called Conductive Bridging Random Access Memory, or CBRAM.
CBRAM is a kind of non-volatile memory, which means it can store data even when off power. This allows CBRAM to enter a kind of hibernation state, which is how conventional flash memory works.
Adesto’s CBRAM, however, is much more efficient at storing memory than flash and can write data into memory using just 0.6 volts, compared to about 10 volts. It can also write that data 20 times faster.
All told, CBRAM can leverage these advantages to operate using as little as one hundredth the energy required for comparative flash solutions (one tenth the requirement at most). In combination with energy harvesting systems, this enables the IoT to be self-powering and, in many cases, will remove the need for batteries altogether.
As a bonus, Adesto’s CBRAM can withstand gamma and electron beam sterilization without loss or corruption of data, which is something flash memory can’t do. This makes it ideal for use in smart medical devices in a surgical environment.
The one downside to CBRAM is that it doesn’t store a lot of data. This limits its use in intense computing applications (you won’t see CBRAM implemented into a gaming PC, for instance) but for IoT sensors and many wearables, the storage is typically more than enough.
As for company performance, Adesto reported record third quarter results on November 8. Revenue came in at $15.2 million, representing an increase of 36.3% from the same period one year prior. Gross margin is solid at 49.0% and operating expenses are stable at $8.3 million.
GAAP net loss was $1.0 million for the period, or ($0.05) per share. Non-GAAP, the company was profitable with income of $0.4 million, or $0.02 per share. This was a full year ahead of schedule for non-GAAP profitability.
Adesto’s CEO Narbeh Derhacobian highlights the company’s recent progress in the following statement:
“During the quarter, we continued to make great strides expanding our tier-one customer base by leveraging our new standard serial flash offerings allowing us to showcase the value-added features of our smart-memory devices.
We also continue to see strong design win activity, with over 75% of our design wins within our two largest end-markets of industrial and consumer, where our products are ideally suited for connected, low-energy applications. An increasing number of our design wins involve applications such as smart meters, smart lighting, fitness devices, voice-activated home appliances, touch-sensor applications as well as many other types of IoT and embedded devices.”
With $30.5 million in cash and equivalents, offset partially by $13.4 million in long term debt, Adesto is in healthy financial condition at its current burn rate. The company has $58.3 million in assets and $25.9 million in liabilities.
Adesto has guided revenue growth at 30% for the fourth quarter, which would mark the third consecutive quarter at that level.
As for valuation, Adesto trades at a price to sales ratio of 2.6 which is acceptable at the current growth rate.
We rate Adesto Technologies Corp (IOTS) a “Buy” under $9.00. The risk level is “Medium”.
Jason Stutman, The Cutting Edge, www.angelpub.com, 877-303-4529, November 21, 2017