I'm getting quite a few questions lately regarding one my favorite companies, Ekso Bionics Holdings Inc. (OTCBB: EKSO).
As you know, the company is tied into one of the most dynamic Total Wealth Trends of all - and potentially the most profitable, too - Human Augmentation.
So I thought we'd revisit EKSO Bionics and, in the process, update some of the interesting stuff that's going on.
But first, I owe you an apology.
I totally underestimated the company's potential.
Let me show you why - and my new price per share.
This Upward Revision Will Send EKSO Soaring Higher Than I Predicted
Last October I explained why I thought EKSO stock would be worth $21.14 per share by 2020.
Now I need to revise that number - higher. Turns out I was simply too conservative in my thinking.
At the time, I believed that EKSO will capture 25% of the human augmentation market. That's still true. What's changed is my thinking on profit margin, and that's based not only on what EKSO itself is doing, but on what's happening in the broader industry itself.
Simply put, these revisions paint an even more bullish picture for the stock.
My new price is $21.85 a share by 2020 rather than the $21.14/share I originally predicted (details in the sidebar for those of you who like numbers as much as I do).
Not surprisingly, I'm more excited about the company's profit potential than I've ever been before.
That said, I recognize that you may feel a little trepidation when it comes to my enthusiasm, especially if you bought in at or near $1.91/share, the company's peak before it slid down to $1.16 where it's trading now, at the time of this writing (Jan. 30).
Try not to let that bother you.
Fluctuations like we've seen with EKSO over the last few months are standard and entirely unremarkable for any growth company on the cusp of some really game changing technology - though I'll be the first to admit that it doesn't always FEEL that way.
Normal Growing Pains for an Extraordinary Company
So let's take a minute to put that in perspective.
EKSO's trading around $1.20 a share at the moment, and that means it's up about 20% since I initially recommended it. But so is volatility, as a number of you have so succinctly noted.
I totally get where you're coming from, especially if you are not used to making the kinds of moves we're making. This clearly isn't Intel or even Microsoft.
This is a breakthrough company operating at the very bleeding edge of new medical technology. So it's going to trade erratically, just as all new companies do under similar circumstances. If you recall, that's why I deliberately chose "keeping emotion out of the equation" as the first Total Wealth Tactic to share with you.
Think about it for a minute...
- EKSO was founded in 2005 and has a market cap of merely $95 million. It's a micro-cap in the truest sense of the word. It's only natural that it's going to have a broader trading range and attract the kind of day-trading gamesmanship we're seeing. Eventually that will get bled out as the company attracts more capital and more success.
- The company has more than 150 international patents with 10 U.S. patents granted and another eight filed. This gives it an annuity-like revenue stream down the line from partners who license the technology. This is exactly the same "racket" pharma companies use to lock in hundreds of millions of dollars each year even though the drugs they're bringing to market aren't quite ready... yet.
- The company is pushing boundaries that its more entrenched competitors, Cyberdyne Inc. (TYO: 7779) and ReWalk Robotics Ltd. (Nasdaq: RWLK) can't. As great as those two companies are, what they're doing really isn't entirely new, but rather small and incremental improvements to existing technology. So EKSO's got more upside by virtue of the fact that it's leapfrogging current thinking and industry standards. It's no wonder the company's latest financial data reflects this.
But let's return to the licensing model for a minute because that's key.
EKSO announced a partnership with Ottobock, a global leader in prosthetics and neuro-rehabilitation. Under the terms of the agreement, EKSO would license two prosthetics technologies to Ottobock in return for a combination of licensing and royalty payments.
"We've been intrigued by Ekso Bionics' technology for many years, and are excited to start a formal relationship with their ground-breaking company," said Ottobock's Chief Technology Officer, Hans Dietl, in a statement at the time.
This made the news, but it wasn't covered as the jaw-dropping development I'm telling you it is. Ottobock is a giant in the prosthetics market, with subsidiaries in 49 countries. It's been around since 1919, and it brought in 861.3 million euros in sales in 2013. Now it's paying tribute to an upstart that isn't even 10 years old yet, but is already causing ripples in the Human Augmentation sector. Neither ReWalk nor Cyberdyne are seeing similar developments with this kind of scalable potential to my knowledge.
Ottobock isn't the only big company to notice EKSO's potential, either. Lockheed Martin Corp. (NYSE: LMT), a $60 billion defense and security company, has partnered with EKSO since 2008, after realizing the potential of its powerful exoskeleton, called the Human Universal Load Carrier (HULC). According to EKSO's 2013 annual filing with the SEC, Lockheed Martin paid them more than $6 million in licensing fees for HULC alone.
This steady stream of licensing fees that's only growing over time is a major reason that EKSO's Q3/2014 earnings report showed a vast improvement in the company's financial position. Total revenue was $1.6 million (a 100% increase from Q3/2013) and net income was $12 million, compared with a net loss of $1.9 million last year. So the company has gone positive (which is a critical milestone, by the way).
The surge in revenue comes not just from licensing revenue, but also from sharply increasing demand for EKSO's products, in particular its new GT robotic exoskeletons, as you can see below:
EKSO shipped 18 of its elite GT exoskeletons in Q3/2014, bringing the total number shipped for 2014 at 46, year to date. That represents a 250% increase over the first nine months of 2013. In addition, the non-profit providing essentials for U.S. troops, SoldierSocks, has pledged to keep the company's momentum going by ordering 80 GTs over the next three years. That's a very good sign because it shows the organization is happy with its initial 10-suit purchase, and they could well expand their order in the near future.
With this surge in shipments, EKSO has now expanded its global presence to the point where, as of just Q3/2014, it had shipped a total of 95 units to 72 centers in 17 countries.
Now, as thrilling as the overseas expansion is, this isn't even the most exciting stuff. That's a distinction we saw in headlines recently that, I might add, 99% of investors totally missed or ignored.
EKSO Bionics Got a Nod from the U.S. Army
In December 2013, EKSO was given a 12-month, $1 million contract by the U.S. Army to build and test a next-generation exoskeleton. The Tactical Assault Light Operator Suit (TALOS) has already been dubbed the "Ironman suit" and is considered to be at the vanguard of U.S. military innovation.
On Jan. 22, 2014, it was announced that EKSO's work in this first phase of the TALOS project had won the military's trust to the point where they had decided to award the second phase of the development contract to EKSO as well. The awarding of this contract marks more than $35 million in developmental work done by EKSO's team of engineers.
Some phases of TALOS' development are trickier than others. The second phase that EKSO is entrusted with - the development of an exoskeleton that's both light and strong while also enjoying a full range of motion - is the most complicated. The fact that the military has entrusted EKSO with this stage of design is a huge vote of confidence for the company.
And this coup on the military stage comes at a time when EKSO is advancing on other fronts (pun absolutely intended!)
On Jan. 29, 2015, it announced a study being conducted with nine major hospital leaders in Europe (the SPZ Nottwil in Switzerland, Spain's Guttmann Institute, and the Clinic for Spinal Cord Injuries in Denmark, just to name a few) that will examine how EKSO's GT suits might alleviate complications of surgeries and even seemingly unrelated ailments like bladder dysfunction that are commonly associated with spinal cord injuries.
Early results from the study are expected in January 2016 and could go a long way towards establishing EKSO's contributions to recovery therapy. In the meantime, its medical device revenue is already taking off, having grown 100% year-over-year from Q3/2013 to Q3/2014.
A Trifecta of Unstoppable Trends
Under the circumstances, I think you can see why I'm even more excited about Ekso than I was before.
The most recent quarterly report is enormously heartening not only from a financial perspective, but from the two key takeaways in it: a) the company's sales channels are growing deeper, broader, and more profitable and, b) the company is already winning business away from older, more mature players with dramatically more resources.
But again - and I cannot state this strongly enough - the kind of price action we're seeing is entirely consistent with a small, growing company that's about to hit its stride. You can wait until all this is confirmed by a higher stock price, or you can get in now ahead of the move and potentially laugh all the way to the bank. I'd rather see you make your move now when EKSO is overcoming its growing pains away from the media spotlight.
Management is solid and my meetings with them suggest they are focused with laser-like intensity on the task at hand. Plus, the company still has solid reserves, which means that they don't face liquidity concerns that might drive them to make short-sighted mistakes, which is the most common trap for small-caps.
At the end of the day, any company, big or small, can be made or be broken by a single Trend. That's why I've done my best to highlight how and why the company is actually tied into three of the biggest Unstoppable Trends we're following - Medicine, War, Terrorism & Ugliness, and Technology - EKSO has the power of not one but three trends behind it.
With a trifecta like that, the normal backdrop of growing pains any new company experiences are bound to be temporary.
Editor's Note: With Keith predicting EKSO shares to rise to $21.85 by 2020, there's still time to get in and enjoy returns like the 100% gains that his first readers had the chance to capture within six weeks of his initial recommendation. For the full initial report - and access to dozens of Keith's investment tactics and insights - subscribe to Total Wealth here - it's free!
About the Author
Keith is a seasoned market analyst and professional trader with more than 37 years of global experience. He is one of very few experts to correctly see both the dot.bomb crisis and the ongoing financial crisis coming ahead of time - and one of even fewer to help millions of investors around the world successfully navigate them both. Forbes hailed him as a "Market Visionary." He is a regular on FOX Business News and Yahoo! Finance, and his observations have been featured in Bloomberg, The Wall Street Journal, WIRED, and MarketWatch. Keith previously led The Money Map Report, Money Map's flagship newsletter, as Chief Investment Strategist, from 20007 to 2020. Keith holds a BS in management and finance from Skidmore College and an MS in international finance (with a focus on Japanese business science) from Chaminade University. He regularly travels the world in search of investment opportunities others don't yet see or understand.