While augmented reality is a hot topic among gamers, West Henrietta, New York-based Vuzix (NASDAQ: VUZI)
has its eyes on the industrial and enterprise markets.
The stock leaped 921.66% over the past year and is up 76.65% year-to-date.
Augmented reality has a number of applications. The Pokemon Go craze a few years ago used AR to blend cartoon critters within an actual environment, as seen on a smartphone.
Applications in other areas, such as architecture and design, medicine, education, and fine art also incorporate AR.
Vuzix’s AR glasses are designed for various industrial applications, including sports training, construction, manufacturing and medicine.
The company has had a run of good news lately. In February, BTIG initiated coverage with a buy rating.
More recently, Vuzix announced it would participate in a seed investment round to raise capital for order fulfillment and supply chain software maker Ox Fulfillment Solutions. Ox plans to use augmented reality glasses to help retailers speed up order processing.
On March 1, Vuzix said it would support the Microsoft Teams meeting platform for enterprise users. In its news release, Vuzix said the partnership would offer “hands-free Microsoft Teams interoperability with our M400 and M4000 Smart Glasses.”Microsoft Is Partner And Possible Rival
Microsoft is a valuable partner for Vuzix, but the software giant is also developing its own augmented reality technologies.
At its March 2 Ignite digital conference, Microsoft giant highlighted its Mesh technology that allows participants to share holographic experiences on a range of devices.
Microsoft has been developing augmented reality technologies, including its own Hololens 2 device, for years. However, the Covid-19 pandemic accelerated attention to systems that enable remote collaboration.
Analysts say Microsoft’s AR and mixed-reality technologies have potential in several areas, including employee training, health care and engineering.
Meanwhile, Apple (NASDAQ: AAPL) is developing its own AR product, Apple Glass. The company has not set a release date, but analysts expect the wearable device to synchronize with the Apple operating system and its array of devices, including the iPhone and Apple watch.
Competition from the big boys doesn’t seem to phase Vuzix, as it’s racking up partnerships and alliances. Investors might also file away an idea in the back of their minds: Companies that develop technologies in the same arena as behomoths often position themselves for a sale. Nothing to that effect has been announced, and investors shouldn’t anticipate it anytime soon, but it’s certainly a possibility down the road.
Stock Becoming More Volatile
Vuzix is a volatile stock, with a beta of 1.46, meaning it could be 46% more volatile than the broader market, as a whole.
The stock has been prone to wide price swings since its initial public offering in 2015. The character of trading settled down somewhat in 2020, but wide intraday price swings returned in December, and haven’t subsided.
This intraday volatility is an indication of wide bid-ask spreads, meaning that buyers and sellers aren’t always in agreement on the stock’s valuation.
That phenomenon is more common in smaller stocks like Vuzix, which has a market cap of just $766.5 million, and a float of just 39 million shares.
While that float is higher than the typical characterization of low-float stocks with 10 million to 20 million shares available to the public, it’s still fairly small. Stocks with a low float and small market cap are often more volatile than larger names, as liquidity can become a problem for buyers and sellers alike.
Sparse Institutional Ownership
That lack of liquidity also makes these stocks less attractive to the big institutional buyers who control 70% to 80% of trading volume. In the most recent quarter, only 33 funds held shares in Vuzix. In contrast, 7,948 funds held Microsoft (NASDAQ: MSFT).
The largest mutual fund owner of Vuzix is the Vanguard Total Stock Market Index Fund (MUTF:VTSMX), which holds 2.41% of available Vuzix shares.
When it comes to the fund with the largest share of Vuzix in its portfolio, that’s the Taylor Frigon Core Growth Fund (TFCGX). Vuzix accounts for 2.07% of fund assets.
Vuzix stock has been finding support near its 50-day line in recent sessions, a sign that investors are propping up shares at that level. That indicates confidence in the stock’s future - for now, anyway.
A possible catalyst for a price move in either direction: The company reports fourth-quarter results on March 15. Analysts expect a loss of $0.11 per share on revenue of $4.01 million. Both would represent gains over the year-earlier quarter.
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