If there is a single thing investors should know about a company's stock price, it’s that, even at their best, they are an emphatically imperfect metric. If it weren't, prices wouldn't fluctuate by large percentages based on a single analyst or retail trader comment, but any investor who watches financial headlines knows how true that can be. Regardless if they are megacaps like Tesla (NASDAQ: TSLA) or Amazon (NASDAQ: AMZN) or microcaps like KULR Technology Group (NYSE-Amer: KULR), millions of dollars of market cap can be erased from the books in seconds. Is it justified? In extreme cases, like a bankruptcy announcement, yes. But in most instances, value is taken from companies not based on a material event or independent price modeling but as a result of a single comment followed by herd mentality.
KULR was referenced above for a reason. Priced at $0.38 a share, its stock may be more disconnected from an assets, revenue growth, and forward-looking guidance perspective than it’s experienced in quite a while. Yes, it's fair to point toward the company closing its $2.875 million underwritten public offering that priced roughly 9.3 million shares, including the underwriter's over-allotment, at $0.35. Still, even this metric can be misleading since KULR went to the markets for capital in turbulent markets, where those offering capital did so under super-aggressive terms.
However, that financing is now water under the financial bridge – and the resulting meltdown in KULR stock to its current level appears well overdone.
Analysts Model for 1742% Upside, KULR Doing Its Part
Analysts covering KULR stock think so, too. The three covering KULR shares each have a BUY rating and price targets as high as $7.00, 1742% higher than current, down to $1.20, 215% higher than where KULR trades today. Taking a more conservative approach and looking at the midpoint of the three analyst models, which stands at $3.28, KULR investors may be staring at potential gains well beyond the low estimate of 215%. Notably, the company is certainly providing the fuel to get there.
In October, the company announced it had received a contract from a top-5 American electric truck manufacturer to develop newer and safer batteries for its next-generation fleet of electric trucks and SUVs. Selecting KULR for that job is no coincidence. The KULR ONE Design Solutions (K1DS) platform is more than best-in-class; it can expedite the evolution of next-generation electric trucks and SUVs that need safer battery power. That deal is good news for KULR, EV consumers, and the unnamed manufacturer. While KULR didn't name the manufacturer, they did point to that company publicly forecasting a substantial ramp-up in production of its electric truck in 2024 and, more importantly to KULR and its investors, utilize the company’s safer and superior battery performance to distinguish itself from rivals and unlock its expected growth. Business with them could lead to more, especially with Research and Markets reporting that the US electric truck market is expected to grow at a 54% CAGR and reach $15 billion by 2030. There’s more supporting the value proposition.
A week before that announcement, KULR said it had entered into a Memorandum of Understanding with privately-held precision nanocoating technology company Forge Nano. The strategic partnership is expected to generate initial revenues between $3.5 million to $5 million, resulting from the combined offerings of the KULR ONE Design Solutions platform and Forge Nano's proprietary Atomic Layer Deposition coating process, which they believe will serve as a breakthrough product to serve demand from OEM partners by providing unmatched battery safety and efficiency. The deal doesn't stop there.
KULR further said that the strategic partnership will assess Forge Nano's premium battery cells for space and US Department of Defense applications. The evaluation process involves utilizing KULR's automated cell screening to measure voltage, temperature, and impedance of individual battery cells, analyzing the data to identify potential issues, and optimizing battery cell performance compliant within the strict NASA flight specification reference points. Incidentally, KULR also recently announced securing a third order for automated battery cell screening services from NASA. That modular screening technology allows for ease of scalability, a requirement for the forthcoming partnership that expects an appreciable uptick in screened cell sales.
Billions of New Dollars in Play
In addition to these value-driving agreements, investors must also appraise the potential in play from the US Department of Energy's intention to make available a second round of funding to support US battery production and recycling. That includes a $3 billion in Bipartisan Infrastructure Law funding open to American businesses seeking to produce North American–made batteries, putting KULR, through its partnerships, in an enviable position to capitalize on the opportunity by ensuring that the US-based battery production value chain redefines industry standards in battery safety and performance.
Here's even greater news for those evaluating the KULR value proposition: agreements don't end with the DOE. KULR has secured revenue-generating deals with NASA, the US Air Force, and the Department of Transportation. On the private sector side, they have working relationships with Boeing (NYSE: BA), Ball Aerospace (NYSE: BLL), Airbus (OTC: EADSY), Lockheed Martin (NYSE: LMT), Leidos (NYSE: LDOS) and Raytheon (NYSE: RTX). That's just naming a few, with the list going on as more companies and agencies understand the value KULR brings regarding battery safety.
There’s good reason for the growing interest in KULR. Foremost is that when it comes to battery safety technology, they are the best in the sector. The company is actively developing, manufacturing, and licensing next-generation carbon fiber thermal management technologies for batteries and electronic systems, including breakthrough cooling solutions for NASA space missions. KULR’s strong IP portfolio does more than protect its vital technology; it enables the company to work exclusively with leading aerospace, electronics, energy storage, 5G infrastructure, and electric vehicle manufacturers to make their products cooler, lighter, and safer for the consumer.
Increasing Revenues and Lowering Overhead
A proper appraisal of KULR requires more than recognizing its game-changing battery safety technology. Factoring in growing revenue streams is also critical to the calculation. In that respect, KULR delivered an excellent performance for its Q2, ending on June 30, 2023. Revenues increased to $2.7 million from $0.6 million reported in the same period last year, an approximately 360% increase. Contract Services revenue soared over 2300%, resulting from contract services revenue of roughly $0.7 million versus $0.03 million in the prior year. Product revenue was also impressive, posting approximately $2.0 million compared to $0.6 million in the same period last year, representing an over 250% spike. Perhaps the best part of the report is that revenues are starting to fall faster toward its bottom line, with gross margins increasing to 37% compared to 28% in the same period last year. KULR expects those margins to hold, even guiding them to reach the low 40% range in coming reports.
That fits well with its ongoing business. KULR is currently working to maximize the value of its $1.13 million contract award from the US Army to develop next-generation high-energy battery packs employing the KULR ONE Design Solutions platform. Other revenues are accruing from its partnership with a world-leading provider of drone-powered package delivery services, with KULR leveraging its K1-DS platform and proprietary technology for the development of high-capacity lithium battery packs for use in last-mile delivery, the most expensive and time-consuming part of the shipping process. That's not all.
KULR is also accruing value from an additional development contract from a United States Armed Forces branch. KULR was hired to develop high-energy battery packs for uninterruptible power supplies to mobile command centers. These contracts are excellent examples of how the KULR ONE Design Solutions platform provides KULR clients and partners with unique, comprehensive solutions that management believes result in the most comprehensively packaged battery safety solutions for high energy and demanding applications.
More Clients, More Revenues
The list of revenue-generating deals goes on. For instance, KULR continues to provide safe battery testing solutions to a top 5 global manufacturer in the electric vertical take-off and landing ("eVTOL") sector. These tests, expected to be completed by the end of Q3, will pave the way for further advancements to eVTOL battery safety ahead of federal regulators’ expectations to present certification rules for the emerging eVTOL air taxi market.
KULR is also expanding its SafeCASE™ product line for electric bikes and the consumer e-mobility market, bringing to the consumer level the same patented technology it provides NASA to protect astronauts on the International Space Station and manned space missions. Keep in mind that there are over 300 million e-bikes in use worldwide, with that number compounding at estimated double-digit percentages. As consumers learned with hoverboards, the threat of battery-related fires is more than real; it can be fatal. Thus, KULR's proactive stance to engage this market opportunity can lead to a potential revenue windfall.
Remember, KULR's Thermal Runaway Shield (TRS) technology prevents battery explosions. And if it's robust enough to be used by NASA and in the International Space Station, having it as a part of all battery safety could get mandated faster than many think.
Partnerships with Industry Giants
Of course, as one would expect, KULR's expertise in battery safety isn't going unnoticed in other sectors. Their breakthroughs in lithium-ion battery safety technology have led to deals with many of the largest car companies in the EV industry. That includes one with Andretti Technologies, in which KULR provides thermal management and battery safety solutions to the company’s electric SUV extreme racing team Andretti United Extreme E. That deal can also benefit from joint research to co-market proprietary battery products and solutions. The EV sector isn't alone in supporting higher KULR valuations.
KULR is also working with Leidos to provide battery safety technology critical to storage and transportation. It’s partnership with Heritage Battery Recycling addresses the same, opening the doors of opportunity to work with transport and delivery companies like United Parcel Service (NYSE: UPS) and FedEx (NYSE: FDX) due to earned certifications. Currently, those allow for the shipment of batteries utilizing the KULR Safe Case products through UPS' vast shipping network. It also allows its US DoT-compliant "Safe Case" to be used as a safe and reusable shipping container for Li-Ion battery transportation up to 2.1KWh. That allowance provides KULR's major recycling partner with a safe shipping container that can handle batteries above 300Wh. And with billions of lithium-ion batteries needing proper disposal, it could significantly steepen KULR's revenue curve.
A Value Proposition Worth Seizing
After raising capital last month, KULR is shifting its growth pace into warp speed, capitalizing on diversified market opportunities that, when combined, will send company revenues appreciably higher. That's not unwarranted speculation, either. Investors can read about the contracts, partnerships, and certifications that separate this $0.38 stock from virtually every other sub-dollar publicly traded company. Those who do will find it hard to refute that KULR is more than ideally positioned for near and long-term growth; they are better positioned than at any time in its history to achieve it.
All told, the KULR value proposition, especially at current prices, shouldn't be ignored. Yes, micro and smallcap stocks have been weak as of late. However, weakness exposes opportunity, and in this case, KULR presents an excellent one. With best-in-class battery safety technology, contracts generating higher revenues, and a Who's Who client list, KULR may be the hidden gem in the smallcap world.
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