Shares of Energous (WATT 0.74%) recently jumped after the wireless charging technology company announced a new partnership with microbattery maker ZPower. The two companies will develop silver-zinc microbatteries that can be recharged by Energous' WattUp technology.
Energous claims that since microbatteries are smaller than traditional batteries, they're "more scalable" and could be used in the "hearables, medical, military/defense, and consumer electronics industries." This partnership sounds like good news for Energous, but will it help the stock recover from its near-70% decline over the past 12 months?
Image source: WattUp.
What happened to Energous?
When Energous went public in 2014, it dazzled investors with promises of wireless charging pads that could charge devices from 15 feet away. The stock subsequently attracted a stampede of bulls, for two reasons: The FCC approved a low-powered version of its WattUp charging technology for Internet of Things (IoT) devices in 2016, and it secured a manufacturing deal with Dialog Semiconductor to produce a wireless charging chip in 2017.
Some analysts speculated that chip would power Apple's iPhones, and Energous didn't shoot down the stock-boosting rumor. Unfortunately, Apple ultimately chose Broadcom's wireless charging chip, which used the Qi wireless charging standard developed by Renesas' IDT.
Apple also eventually cut Dialog out of its supply chain, crushing all hopes that Energous would hitch a ride on the tech giant's coattails. In late 2017 the FCC approved Powercast's rival wireless charging solution, which could remotely charge devices from 80 feet away.
All those setbacks indicated that Energous' Wattup technology wasn't ready for prime time, and the bears crushed the stock. That's why it wasn't surprising when Energous' founder, SVP, and chief technology officer Michael Leabman resigned last January.
More approvals and partnerships, but no real revenue growth (yet)
A few flickers of hope appeared in the second half of 2018. Last June, Energous partnered with the Chinese company IDT (a Chinese firm, not be confused with Renesas' subsidiary) to produce wireless charging transmitters for gaming controllers.
Last December, Energous announced the FCC approval of its first commercial product, a WattUp-powered personal sound amplification product (PSAP) manufactured by Delight. PSAPs are generally considered cheaper alternatives to hearing aids, which are certified for medical use and detect a wider range of sounds.
Image source: Delight.
Energous also unveiled a handful of other WattUp devices at CES 2019, and it announced that another new hearables partner, NewSound, would launch WattUp-powered PSAPs by the end of the year. Yet none of these partnerships generated any meaningful revenue growth for Energous over the past year.
|
Period |
Q2 2018 |
Q3 2018 |
Q4 2018 |
Q1 2019 |
Q2 2019 |
|---|---|---|---|---|---|
|
Revenue |
$205,773 |
$228,000 |
$56,000 |
$66,500 |
$47,500 |
Source: Energous quarterly reports.
Instead, its revenue growth dried up as it lapped its first royalty payment from Dialog in 2018. The three analysts that cover Energous expect it to generate $940,000 in revenue this year as it reaps higher royalties in the second half of the year -- but that's still a tiny figure for a company with a market cap of over $100 million.
The bulls believe that figure will increase significantly over the next few years and offset its massive losses -- which hit a whopping $20.8 million in the first half of 2019. Unfortunately, they're ignoring two big elephants in the room: Broadcom and Renesas are already making Qi the industry standard for short-range wireless charging, while Powercast's charging solution looks more advanced than Energous' WattUp.
What does the ZPower deal mean for Energous?
Energous' new partnership with ZPower isn't a game changer. Instead, it joins a long list of vague partnerships with tiny companies. Energous claims that ZPower is "the world's only developer of silver-zinc microbattery technology" -- but most mainstream products (like smartphones) actually use lithium-ion batteries instead.
In short, Energous will apply a niche wireless charging technology to a niche microbattery technology. Investors shouldn't expect the combination of those two underdogs to generate meaningful revenue anytime soon. Instead, investors who want to profit from new wireless charging solutions should stick with safer plays like Broadcom and Renesas instead.
