Chardan Stays Bullish On Vuzix After Q2 Print

Shares of virtual reality headset maker Vuzix Corp VUZI are up strongly following the company's second-quarter report. 

The Analyst

Chardan analyst James McIlree maintained a Buy rating on Vuzix with a $10 price target. 

The Thesis

Q2 revenue of $2.6 million exceeded Chardan's $2-million estimate, helped by $1.5 million in M300 sales and a $650,000 contribution from Toshiba Corp TOSBF, McIlree said in a Friday note. (See the analyst's track record here.) 

The gross margin expanded from 11 percent in the first quarter to 25 percent, in line with Chardan's estimate. Operating expenditures exceeded the firm's estimate by $1.2 million. 

Vuzix's strong gross margin performance may not repeat in future quarters, the analyst said, adding that operating expenditures will continue to expand to drive future growth.

Chardan expects second-half sales to be driven by sales of M300 augmented reality smart glasses, with larger potential rollouts occurring at an ASP of $1,100, generating well over $1 million. 

The Blade is likely to be a strong contributor in the second half, McIlree said. The smart glasses are "less powerful than the M300, but [their] form factor could be more attractive in some scenarios."

The targeted ASP for the Blade is initially expected to be $1,000 before falling to around $500 in 2019, the analyst said. 

Chardan expects integration with Amazon.com, Inc. AMZN's Alexa to increase the product's visibility.

The Price Action

Vuzix shares have gained about 8.8 percent year-to-date.

Vuzix shares were falling 0.47 percent to $6.77 at the time of publication Friday. 

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Photo courtesy of Vuzix.