The shares of this optical sensor company were just initiated at Dougherty, with a ‘Buy’ rating. The company’s ISP Optics Corporation subsidiary was just awarded a $5 million purchase contract to supply a variety of infrared (“IR”) optical lens elements to a major commercial infrared vision products customer, and analysts are forecasting double-digit growth for the company next year.
LightPath Technologies, Inc. (LPTH)
From The Inger Letter
A year ago, we returned to a 10-fold winner of an earlier era that we simply thought evaporated. But we learned the company was making money and just completed a promising strategic acquisition: ISP Optics. Our entry was between 1.40-1.60 per share; and the stock doubled by summertime.
As that developed, along with realization by a few analysts that LightPath Technologies, Inc. (LPTH) had made not only a transformative acquisition in the infrared optical sensor as well as expanded facilities to accommodate a coming 5G roll-out in China, our focus remained: a speculative investment holding, not a trading stock.
Because one peer discovered LightPath ‘after’ it had already doubled for us, that set-up a noted ‘possible’ double-top when it popped to the 4 level. Hindsight suggested it be sold short-term; although we didn’t (at least, did not chase the run-up there, although believed that in the long-run, the other chap who joined-in would be right—that it was a bargain ‘up to the 4 area’).
Now the shares have fallen back to the low 2’s; primarily because of sales by the very buyers near the 4 level who came-into the move late; and from the exercise of Warrants, which expired at the end of 2017, which some holders may not have retained the shares after exercising.
Although it’s hard to say at what point in the new year revenue will perk-up from the telecom optical sector in China (where LPTH has expanded, too); the progress and ability to serve numerous customers (mostly well-known names in automotive, telecommunications, military, aerospace, medical as well as tools and measurement; and/or its expanded and integrated facilities in Latvia, as well as the primary Orlando facility during later 2017, in anticipation of growing demand upon their production capacity ahead.
Why continue LightPath as ‘pick of the year’ for 2018? Not only because of the promise that is not yet fully appreciated by investors, but because most stocks these days do not have a decent risk/reward profile after the market run-up of the past year.
Perhaps embedded in LightPath is a subtle silence about projects the company is working-on—probably due to competitive concerns, given how patents are routinely worked-around, as well as reverse-engineering. It’s actually a plus that LightPath sells to most of the known product makers, a supply relationship which allows it to fill demand no matter who wins in certain areas, including the key ‘autonomous driving’ and ‘vehicle sensor’ fields.
LightPath is consolidating after a washout that followed it having more than doubled from initial selection a year ago. The potential of the stock doubling from current levels ‘again’ seems fairly clear; regardless of any rocky behavior that may exist very short-term as a degree of focus (perhaps overemphasis) is placed on China 5G roll-outs.
There are few companies at the moment trading at a low PE that are also growing at a steady clip like this. And that’s without considering tax benefit or the ability to repatriate money from China, now at a lower tax rate, too. It wasn’t widely noticed, but the CEO (Gaynor) exercised an option for more shares (15,000 at $3) in November; and there continues to be only insider buying; with no sales that we’re aware of. That’s a positive sign too. Plus it is now in the Russell (small-micro) Index, reflecting it not being so tiny as it was during the transition years that preceded.
LightPath has outpaced its industry growth rates and expanded its bases in preparation for more growth. With modernization and integration of staff of the ISP Optics key acquisition of a year earlier complete, LPTH should be in-position to capitalize with sales and growth progressively ahead.
A year ago, we suggested a target of 3 for LightPath (LPTH) at the 1.50 +/- recommendation as a highly speculative pick-of-the-year. In 2018, we suggest a target of 3 short-term (after the first quarter, perhaps), followed by a challenge of the preceding high of 4, ideally around midyear, if the company executes as postulated. After some churning around prior highs, and even consolidation, we suspect it moves considerably higher in the Fiscal 2019 area. And we’re thinking in terms of 6 or more, depending on the ‘light’ speed at which new technologies ramp and come to market.
In that manner, there are few stocks with a 50% or better upside prospect with less risk out there that we can identify now. Hence we’ll not only stick with LPTH; but for aggressive investors, consider it more than a tiny stock speculation, but a little bit more of a normal (albeit volatile) investment. It’s an opportunity (especially during purges should there be any) for members who have more recently joined, or early members at the mid 1’s; to enter or increase (within reason) positions. We’ll continue covering it regularly.
Gene Inger, The Inger Letter, www.ingerletter.com, December 30, 2017