A FOCUSED B2B2C TECHNOLOGY PLAY IN SECURITY
NXT-ID has brought the elements of their strategy together to provide technology to larger organizations needing strong solutions in security, privacy, authentication and payments. Although the company has taken flack for not conquering the world with their Wocket digital wallet last year, these large deals and the strategy would not have been possible without the pioneering work that went into shipping a working if not perfect product.
Investors in NXT-ID should consider the following:
- Security, privacy and convenience remain huge concerns for consumers and the companies serving them. Despite massive investments, progress has been lacking. New technologies like EMV and digital payments are promising but will take years if not decades to become universal.
- The Wocket has proved the value of the digital wallet concept and led them to a landmark deal with WorldVentures to deliver a next-generation card in volume that will solidify NXT-ID technology as the key to providing a smart, secure, private and convenient consumer “card.”
- As NXT-ID ramps revenue this year by delivering against the $15M WorldVentures purchase order they will finally be demonstrating robust revenue growth. Most importantly, it marks a shift from a “development stage” company to commercial success.
- Up next are more alliances and deals that will extend the footprint of NXT-ID technology further into payments and also more broadly into consumer-focused products in the “internet of things” or IoT technology market. We’ve seen a huge increase in activity and investment from large companies and startups to leverage IoT into new markets in healthcare, smart homes, smart cars, etc. The upgraded card technology delivered this year is a strong platform for these types of applications.
- NXT-ID is building a solid commercial technology franchise with what will become a range of partners. According to re/code, Samsung paid $250M for LoopPay and PayPal paid $280M for Paydiant. Both are comparable transactions for what might eventually occur at NXT-ID. The current market value of NXTD stock is about $30M based on the 61.5 shares outstanding post their most recent offering.
- Management expects to file their 10-K within the allowed extension time and is just working through some of their transactional complexity with KPMG.
Replay link: http://edge.media-server.com/m/p/c8nomvhy or see a full transcript (PDF): http://s3.amazonaws.com/PUBLISHED/NXT-ID_Investor_Update_Transcript_and_Slides_April_2016.pdf
Given the large and expanding market opportunity, existing alliances, additional agreements pending, a strong management team and the potential for M&A, the stock at $0.50 looks very attractive.We expect management will execute and later this year reach a “market value“ for the company of $2.50 to $3.50/share.
The WorldVentures deal for NXT-ID is a game changer. The stock ran up to $1 on the announcement and three months in the shares have retraced to $0.50 despite being much closer to realizing the benefits from the deal. At the same time, the company has been advancing their dialog with other companies for which the NXT-ID technology is an obvious fit.
The deal also de-risks the story by a fair amount. The product still has to be delivered in volume, but so far the progress has been good and is on schedule. We acknowledge that there is always a possibility that things will slip, but it’s far from an “invention needed” type of situation.
At least one additional deal is highly probable in 2016, and two or more are possible. That would put NXT-ID in a very comparable position to LoopPay and other technology properties that have been acquired. Based on prior deals, that would suggest something on the order of $150 to $250M versus the current $50M market value.