It was trading at 9 on Tuesday, and now it’s at 31.57 on news of it’s wireless charging. Do you think the run up is over?
I was watching WATT too. I don’t think we can get underneath it. It’s sky-high right now. Generally speaking, your trading will do better if you enter on consolidation patterns instead of on spikes. I’m always thinking risk mitigation and so personally, I only enter on consolidations. That’s why I didn’t chase it at $23. So if I’m unwilling to chase it at $23 because it’s not a consolidation pattern, by logical necessity I’m even more unwilling to chase it at $31. What some amateur traders do is that they say I can’t chase it at $23, and then when it hits $31, they reverse themselves and chase it higher because they fear missing out and are going for maximum greed. You can make money doing that but eventually, you’ll get killed do that on a regular basis. However, entering on consolidations will almost never get you killed. You might take a small loss when your stop loss is broken below consolidation support, but you won’t get killed by a sudden reversal.
So just how overvalued is Energous stock? Traders who chased this stock are buying it for its future growth in EPS and revenue potential. How expensive is that future growth right now? Harder to calculate without P/E because the company doesn’t make any money yet. But if calculate the enterprise value (market capitalization plus debt, minority interest and preferred shares, minus total cash and cash equivalents) the company is worth $175.9 million. However Wall Street is valuing the company at $749.8 million! Keep in mind that on the last earnings report, Energous reported an EPS of -$0.58. The company earned $250,000 during the quarter, compared to analysts’ expectations of $1.2 million. Energous had a negative net margin of 4,203.27% and a negative return on equity of 263.95%.
Energous is not a $30 stock. They have little sales and no big contracts coming. A lot of the hype is that Apple is going to use Energous. Really? There is an AppleInsider report that highlighted Powercast, a second at-range wireless charging company that announced it has received approval from the FCC for its far-field charging technology too. Energous will be competing Powercast for Apple’s business. And who else is coming to market?
Apple is working on its own charging mat, called AirPower, that’ll charge not only iPhones, but also the Apple Watch and AirPods. All three devices can charge at once. Apple says it’s working with Qi to incorporate this into the standard. So much for the Apple racing to Energous hype.
The Samsung Galaxy S6 and S6 Edge have built-in support for both Qi and PMA, so you can just place your phone on any Qi or PMA charging pad, and it just starts working automatically. I’ve had a Samsung Note 5 for a few years now and I charge it by placing it on a charging pad. In fact, a patent application published a few months ago shows that Samsung is working on what looks like its own equivalent of Apple’s upcoming AirPower wireless charging mat. A patent illustration shows it simultaneously charging both a phone and a smartwatch. Samsung isn’t going to race to Energous either.
Don’t get me wrong, I think the future is bright for Energous but it’s going to be a longer and tougher road than greedy traders that rushed into the stock on a knee-jerk reaction to the FCC approval, it’s going to be a lot longer road to cash flow and profits for Energous than these amateur traders realize.
Therefore, again, wait for a consolidation. Let the hype die down and reality set in. When we get a good basing pattern with a positive divergence on large players volume, that will be the time to consider buying Energous because we can get underneath it and set a clearly definable stop loss and target price. For now this highly speculative short covering and spike is going to eventually end badly for chasers in my opinion.