eMagin (EMAN) Reports Q3 Results
It’s time to sell EMAN. Management revealed its two new products for the consumer VR/AR market, both of which are oriented to the recreational space, and toward the night vision market, in particular. You can buy them on eMagin’s new consumer-oriented website, here. The first product is called BlazeSpark, retails for $299, and is a camera and case that you can put an Android phone into and which will allow for night vision and photo-taking. The second is a full headset called BlazeTorch, and retails for $999. Both products allow use of an app to upload and share photos and videos. The image below is from the website.
Management said the total night vision market is around $5 billion, much of which is military. But it also says it sees that the recreation market is totally underserved, and it felt it could expand the market by delivering an attractively priced night vision product. Analysts on the call were somewhat skeptical that night vision for recreation is a real thing that people want. I actually have to side with eMagin’s management on this one and say that I do think it’s real. While not the norm, I (and a lot of my friends) have gone cross-country skiing, downhill skiing, hiking, mountain biking, etc. at night (I have yet to surf at night). You can use a cheap headlamp, or buy insanely bright lights that help you do all these things. Night vision is a very cool option. I think the price point of around $1,000 is a little high (great headlamps go for $200 to $500), but not for the hard-core enthusiast. Is there a lot of demand? I’m not so sure about that, but there is some. Clearly, durability, ease of use, consumer education, and so on are all major obstacles to overcome. The company is selling through its own website, and has no retail distribution. What this means is that this is a relatively low-risk distribution strategy. But it also comes with very low publicity.
Management talked a lot about its ongoing conversations with “tier 1” manufacturers to which it hopes to sell displays for other next generation consumer VR/AR products. Analysts peppered management with questions about the seriousness of the ongoing talks, the size of the end markets, the competitive landscape and the truthfulness of claims that eMagin is uniquely equipped to supply displays that these manufacturers want. The general tone of questions about the consumer-oriented products was skeptical, and I am to. I could be wrong but I think management has been stringing us along as it tries to come up with something that it can sell into the consumer VR/AR market. But at the end of the day, this is a very tough market in which to be a consumer-oriented hardware manufacturer of wearable technologies (look at GoPro, Fitbit, etc.). It’s especially tough if all you do is sell on your own website and nobody knows you exist.
I think eMagin remains a mediocre company that has excellent technology and which will continue to have modest success in its military markets. But I don’t think this is “the next big thing.” I’m too skeptical. Accordingly, I’m moving to Sell today. I think the stock will go back below 2 and you should sell today. As a final note, revenue was down 24% to $3.5 million, operating loss increased by $200K to $2.4 million and cash on hand is now $6.9 million. SELL.