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January 20, 2011 PSW Staff |
climbed by several hundred percent, things most often get messy. In the case of New Energy Technologies, however, there seems to be an abundance of promise coupled with rational spending. That's not to say that NENE doesn't carry similar risks, it just means that they may have a few things going for them that others do not. Back on October 20, 2011, New Energy was featured on CNBC's “Squawk on the Street” in a segment titled “Race to Fuel the Future”. The product is SolarWindow, which is a very thin spray on coating for windows and other surfaces that can generate meaningful amounts of electricity. The technology behind it has been called “The worlds smallest functioning solar cells” and has been published in the Journal of Renewable and Sustainable Energy of the American Institute of Physics. Since that report filed at CNBC, the stock has climbed quite a bit for having no revenues, but product development has passed several key milestones. One was getting some external and official validation from testing done at the Florida Solar and Energy Center (FSEC). This is one place where the University of South Florida (where New Energy has a research agreement) goes to have independent testing done. This is from FSEC's website: “The Florida Solar Energy Center (FSEC) was created by the Florida Legislature in 1975 to serve as the state’s energy research institute. The main responsibilities of the center are to conduct research, test and certify solar systems and develop education programs.” The results that New Energy got from their SolarWindow application were surprisingly good. Engineers were able to demonstrate a cost savings of $40,000 to $70,000 per year for one 40-story building, as opposed to only $20,000 in savings for a rooftop installation on the same building. What is also interesting is that the product has been shown to produce electricity from artificial sources of light better than traditional solar technology. This can provide additional savings in the winter when interior building lights are used more. SolarWindow works both ways and can turn this light back into some energy. The company has made several strides with respect to future commercialization recently as well. One big impediment that may be mostly conquered has to do with the transparency of the early product. They have been able to secure technology making it a lot easier to see through. Additionally, they are slowly building their patent portfolio and securing additional technologies to enhance the efficiency, performance and durability of the product and bring manufacturing cost's down. They are also trying to bolster their commercial protection. Up until now, the company has funded their research primarily with agreements at leading universities and other facilities. They have also shown very modest expenses over the last two years, and although continued dilution is unavoidable, 60 million shares that are currently outstanding is by no means unsustainable. They also have a little bit of cash built up and believe they can market the product through some of their existing channels. It remains to be seen how big the slice New Energy will have to give up to these channels that helped them create the product, but it will likely be pretty substantial. A $120 million market cap right now, however, does not seem completely outrageous. The company seems to be heading full steam with every indication of a final tweaking stage underway, but there is still no definitive time line for a product launch. The company looks to benefit from some government funding, and has started to ramp up personnel as well, recently hiring Andrew T. Farago as C.O.O. who has 16 years of experience nurturing growth companies. Meanwhile, the company's other product, MotionPower is seeing some similar advances and positive testing results, although they are yet to obtain outside confirmation. The system captures electricity from decelerating cars and trucks that drive over top of the unit which helps them slowdown and captures the energy that would have been lost in braking. The stock has had a very volatile history, the kind of volatility that will no doubt continue. NENE hit a high of $5 back in 2007, and fell to as low as 10 cents in the late part of 2008. Since then it has trended mostly upward finding higher highs and higher lows. We feel that where the stock is currently priced at $2.00 may be a tiny bit expensive, but not outrageous, and a little bit of patience could yield a safer entry point, perhaps around $1.75 within a week or two. Keeping in mind that heavy volume has really only come around in the last three months thanks to the CNBC article, we would take quite a bit of care when allocating any funds for an investment. With this said, however, a small amount invested relatively quickly may be the best strategy, as big stock moving news sometime soon is not guaranteed, but is certainly possible. The Risks The two major risks with this trade are not knowing when the product will come to market, if at all, and not knowing what the companies agreements will look like with their partners. A recent University of South Florida agreement that was announced includes no details, as they are applying to keep them secret as to not expose trade secrets. The outcome of this application will likely affect the stock in coming weeks. New Energy is essentially an investment company. They changed their name two years ago as they divested some technologies they were working on in Biotech, and are now focusing on Clean Energy. There is no reason to believe that the same thing can't happen in their current endeavors. 60 million shares out is not excessive, especially when we consider that the share count has not climbed by more than a few million over the last three to four years. It all depends on how fast they can get the product selling, and how much they have to give up. There is no reason to believe that the stock won't be diluted more in the coming months and years. The company will also face patent lawsuits, government regulation and heavy competition, and there is no guarantee that they will get to market first. All in all this stock is a mid to high risk with high potential. |
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