Mobilicom Limited (NasdaqCM: MOB) stock is higher by over 65% YTD. However, while an impressive run, with MOB being one of the most technically advanced cybersecurity and “smart” solutions providers for drones, robotics, and autonomous platforms, that surge could be the precursor to much higher highs. Indeed, that’s bullish speculation. But considering how fast MOB has penetrated key markets with some of the most compelling cyber defense solutions that fit seamlessly into a booming global drone and robotics market, the decidedly bullish sentiment is warranted. (*share price from 01/01/23 – 09/01/23 market close, $0.97 – $1.61 Yahoo! Finance)
More than that, it’s timely. Investors taking an interest at current prices could capture value from a significant valuation disconnect, evidenced by MOB shares trading off their July 52-week high of $3.33 despite being better positioned than any time in its history to capitalize on and maximize revenue-generating opportunities. Said more directly, recent share price weakness more likely exposes an opportunity instead of a trend. In fact, recent news from MOB supports the thesis that MOB stock’s path of least resistance is likely higher.
Updates provided by MOB support that proposition, including announcing it received a purchase order for its end-to-end product solution from a leading global provider of autonomous and remote-controlled armor technology. That deal resulted from a product and services design win, leading to Mobilicom’s Mobile Ground Control Station 10″ Pro, MCU Mesh Networking, and SkyHopper Datalinks being installed into autonomous and remote-controlled electric vehicles (EV) for customers in the homeland security and defense markets.
Mobilicom Differences Are Advantages
They scored that deal after showing product differences that are competitive advantages. Specifically, unlike many competing products, Mobilicom solutions provide comprehensive coverage with seamless integration. Its MCU Mesh Networking technology suite enables remote-controlled operation of the EV, sending and receiving video, location, telemetry, and control information. Then, the Mobile Ground Control Station Pro 10″ console is used to remotely drive, operate, and monitor the vehicle, with the SkyHopper Datalinks then providing backup communications to maintain continuous safety, utilizing redundant safety links to halt the operation in case of an emergency.
The more excellent news, from a company and investor perspective, is that this order is expected to be the first of many more. Mobilicom CEO and Founder Oren Elkayam said, “This purchase order marks the first in a line of expected orders for initial delivery to customers by our design-win partner, an armor and autonomous vehicle provider.” His optimism is based on more than product value. It includes recognizing the value inherent to his company’s impressive IP portfolio that facilitates integrating multiple products into a turn-key bundle ready for deployment. Of course, customers appreciate that package. But they aren’t the only ones to benefit. The company and its investors are also expected to benefit from additional design wins and purchase orders. They will, after all, expedite Mobilicom scaling its platform for larger income-producing commercial-scale shipments.
Momentum on that front is already accruing, resulting from live demonstrations showing the advantages of its end-to-end solutions that deliver a comprehensive and holistic approach to cybersecurity, with system performance optimized to work more efficiently, faster, and with significant cost savings when integrating into new platforms. Those benefits likely attracted Teledyne-FLIR (NYSE: TDY), one of the world’s largest manufacturers of small-sized drones and robotics, to purchase 120 of Mobilicom’s SkyHopper PRO datalink systems.
That deal was announced in July after TDY completed its drone platform’s design, development, integration, testing, and validation, leading to its largest-ever commercialization order to serve federal agencies and customers in the US markets. And that deal could lead to more, noting that Teledyne-FLIR is expected to continue integrating MOB’s SkyHopper PRO systems into small-sized drones for the US Department of Defense (DOD). But the deal isn’t all forward-looking. Revenues from the initial agreement are expected to hit MOB books this quarter. While that’s a value driver in and of itself, there’s more contributing to the bullish appraisal.
Mobilicom Expands Its Specialized Cybersecurity Market Reach
Also in July, Mobilicom announced design win sales in Korea, Brazil, and Canada. In Korea, a drone manufacturer ordered Mobilicom’s newly designed and released MCU Maxi Controller PRO, a mobile, handheld Ground Control Station for integration into its drones. Opening its market reach in Brazil, a client manufacturing robotics and uncrewed ground vehicles ordered Mobilicom’s SkyHopper Datalinks for its small-sized robotics solutions. And in Canada, a drone services provider in the oil, gas, and mining industries also ordered Mobilicom’s SkyHopper Datalinks to distribute real-time sensor feed from drones to on-the-ground users.
Accounting for those deals, MOB has scored 48 design wins as of June 30, 2023. That’s important since each win represents initial sales of Mobilicom’s systems and components being integrated into new autonomous systems designed by manufacturers of drones and robotics. The better news is that MOB describes its growing client book as including many Tier-1 customers. Those deals and the deep pockets that come with them are expected to help accelerate MOB scaling to serve commercial demand from the manufacturers that are bringing increased numbers of uncrewed and autonomous vehicles to the markets. And there are plenty of them needing what MOB provides.
More important than the market “need” is for MOB to sign deals. And they are. Mobilicom is showing consistent growth on the global business stage, with sales accruing from high-profile customers, including corporations, governments, and the military. That’s no coincidence. Its business is earned from exposed competitive advantages, which include outstanding security capabilities and performance in harsh environmental conditions. That’s allowed Mobilicom to leverage the intrinsic and inherent value of its solution portfolio to clients worldwide and, more importantly to the MOB value proposition, is driving revenues higher from hardware and software sales, as well as from licensing fees and professional support services.
MOB Is Growing With An International Presence
It’s accurate to say that MOB has come a long way quickly. Since starting its business in 2017, the company has expanded its sales reach into 16 countries, accounting for over 50 unique client contacts. They also have 34 patent claims in two patent families, which add value by protecting and increasing its competitive edge and distance. Its multinational presence also brings considerable revenue-generating opportunities, even more so in the high-dollar defense and commercial drone sectors. It gets better. Earning a leading position to serve this vast potential comes with a significant prize- the spoils from an over $8.5 billion market by 2026.
Targeting that opportunity, MOB has built its infrastructure to support a strategy to score that role, with its innovative end-to-end solutions-provider abilities already helping the company to enjoy growing market share. Notably, that growth is earned, not given, from robust and comprehensive solutions serving the drones and robotics space. Those include Mobile Mesh Networking Aerial terminals that connect multiple drones to a fleet and swarm operation, its Cybersecurity Suite AI-based 360º degree protection of drones’ platforms data and communication channels, and its ControliT, a cloud-based network management software solutions for drone operators. Further value is added from MOB’s SkyHopper Datalinks Bi-directional data links that share and distribute video and data in real-time, all supported by rugged ground terminals.
Those competitive advantages over competing products and services have led to MOB signing a Who’s Who client list. The company has deals with Airbus SE, Elbit Systems (NasdaqGS: ESLT), Censys, and several other prominent global players. And don’t discount the potential for MOB to score some potentially massive deals with other companies pioneering the drone and autonomous vehicle sector, including Lockheed Martin (NYSE: LMT), Tesla (NASDAQ: TSLA), Boeing (NYSE: BA), and even Amazon (NASDAQ: AMZN), which has kept no secret of its plans to utilize drone and antonymous vehicle technology. Interests there go outside the borders of defense, supporting potentially exponential growth from clients that spend in the billions, not millions, to make their respective products and services better. Frankly, it would be no surprise to discover that some of Mobilicom’s unnamed Tier-1 clients may include one or more from that list.
Recurring Revenue Model: A Valuable Factor
Moreover, a contract earned can be a contract kept. In fact, MOB’s strategy is to keep its clients close with recurring revenue through high-margin repeat hardware sales and from software and cybersecurity SaaS recurring revenues. Remember that once MOB hardware is embedded, the company has a significantly better chance to cross-sell bundled solutions with multiple hardware, software, and services to drive higher revenues while providing flexible pricing that can maintain high gross margins. In other words, MOB can get bigger faster by doing what they do best- serving its clients with an impressive product suite that keeps revenue flowing for them while keeping the barriers to competitive entry high for others.
By the way, more than only clients are paying attention to MOB. The industry also awards MOB innovation with grant awards, certifications, and standards recognition by the US, Japan, and the EU. They have also earned industry leadership awards from AUVSI, the Association for Unmanned Vehicle Systems International, which has helped the company secure meetings with US Congress to advocate for drone cybersecurity. And its popularity is leading to creating shareholder value. Plenty supports that premise.
In March, the company demonstrated a 5G AI Mesh Network for Autonomous Vehicles and announced a share buyback. In April, MOB announced securing a repeat order for its Mobile Ground Control System. In May, Mobilicom technology was chosen by the UAE Government to protect EVs for Homeland Security and defense. Also in May, MOB joined the US cybersecurity Industry standard as a contributor and entered a Strategic Partnership with the US Prime Contractor for the DOD. In June, MOB launched Cybersecure SDR to expand its marketing reach into the mid-sized drone market. In July, the company announced its commercial scale order from Teledyne-FLIR for a drone fleet sold to the US DOD. And in August, the company announced further global market traction by doing new client business in Korea, Brazil, and Canada. That’s a lot of groundwork completed for a microcap company.
More importantly, with MOB stock closing at $1.61 a share at the close on Friday, it supports interest in a valuation disconnect worth seizing.
Targeting 52-Week High, 106% Higher Than Current
And keep this in mind if considering that action. As of August 23, 2023, MOB reported having only 4.8 million shares O/S, with a good portion of those shares tightly held by insiders. Still, there is excellent liquidity, considering the small number of shares in the float. Over the past three months, an average of 1.61 million shares exchanged hands daily. That can keep the trading spreads tight, allowing investors to capitalize on profit-taking, similar to when profits were taken at the $3.33 level in July.
However, take profits on advisement. On the next leg, momentum could push through that prior high, noting that the profit takers at $3.33 sold into stronger hands. And it’s not just a numbers game for the stock. The value inherent in Mobilicom goes much deeper, creating the necessity to factor in the value of unique software and hardware solutions that facilitate reliable connections in the fast-growing, uncrewed vehicle industry. That’s not all. An accurate appraisal must include the value from Mobilicom being ideally positioned and capable of leveraging the strength of its assets to become an industry leader that can provide an industry standard for targeted sectors.
That total, combined with design wins leading to deals with multiple Top-Tier Global Drone Manufacturers, positions the back half of 2023 to be transformational. Considering that the revenue-generating pathway for MOB includes scalable, repeat transactional hardware revenues, plus income from software and cybersecurity products, the bullish presumption for a steepening growth trajectory is more than warranted; it’s justified.
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