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It Can Only Be A Matter Of Time Before Wider Markets Switch On To What Vuzix Corporation (NASDAQ:VUZ

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This article is published in collaboration with Scutify, where you can find real-time markets and stock commentary from Robert Marcin, Cody Willard and others. Download the Scutify iOS App, the Scutify Android App or visit Scutify.com.

Vuzix Corporation (NASDAQ:VUZI) has been on an incredible run throughout November. At the start of the month, the company traded for just $4.55 a share. By November 14, this had risen to $6.55 - a close to 45% appreciation in a little over two weeks.

Right now, Vuzix shares go for $6.15 apiece, down around 6% from the just mentioned highs.

There are a couple of important questions we can ask here. First, what's driving the action and the November upside run? Second, is it likely to continue into the close of 2017 and beyond and, as a follow-on question from this one, is the recent correction an opportunity to pick up an exposure to the company at a discount ahead of a return to the longer-term upside momentum?

Let's look at what's happened recently in an attempt to put forward an answer to these questions.

First, for those new to Vuzix, the company is a technology company based out of New York and it manufactures, markets and sells what it refers to as wearable display devices in the US and internationally.

These wearable display devices have, over the last half-decade or so, become more commonly known as smart glasses - a term that many will probably recognize primarily as describing the hardware that underpinned Alphabet Inc (NASDAQ:GOOGL)'s attempt at breaking into the augmented reality (AR) market, the Google Glass.

Where Alphabet failed, Vuzix has succeeded.

Well, sort of.

Google targeted the consumer market with its Glass device, whereas - initially, at least - Vuzix has focused on the industrial market for this sort of technology. Specifically, the company has created a range of smart glasses devices that are designed to enhance the performance of an individual worker within a commercial environment - be that somebody locating and picking items off shelves in warehouses, fixing products in a remote setting, or piecing together electrical components in a manufacturing plant. These are just a few examples of potential use-cases, of course, but they serve to illustrate the sorts of applications these devices have in the commercial environment.

The company's lead commercial product right now is called the M300 and it was an update related to this product that really kicked off the upside action that we have seen over the last couple of weeks in Vuzix's share price.

Instead of us trying to describe the hardware, take a look at the image below to get an idea of what it looks like:

source

The glasses are designed to be worn wirelessly by the user and connected to a network via either Wi-Fi or Bluetooth, meaning, essentially, they provide the functionality of a smartphone but with the display viewable through the wearer's line of sight as opposed to via a mobile device screen.

So which announcement regarding these glasses got the stock running?

On November 8, 2017, news hit press that the the company has more than 350 M300 pilots in place across a broad customer base, which includes numerous large global companies. The word pilot here refers to what are essentially trial programs that have been put in place by Vuzix and that are designed to prove the impact that the M300 and its associated software can have on various productivity metrics linked to the operational activity of the company that's hosting the pilot.

The more of these programs that are in place, the more long-term customers Vuzix is able to onboard and - at the same time - the more proof of work use-cases the company's sales team has in its back pocket, each of which strengthens the team's pitch when seeking out fresh adopters.

As noted in the press release detailing the 350 pilot program threshold, the company is starting to see more complex and varied use-cases for the M300 that are now being successfully migrated beyond pilot programs in industries like pharma, logistics, field inspection.

The hope is that a large portion of the 350 pilots will also migrate into full-scale programs beyond the initial pilots and, in turn, become long-term revenue-generating accounts for the company.

To get an idea of how these pilots filter through to unit demand, Vuzix expects that, at current growth rates, it will ship hundreds of thousands of devices during 2018.

The day before the pilot program release hit press, Vuzix also announced that it has increased its patent portfolio by more than 50% across the last 12 months. At a time when companies like Apple Inc. (NASDAQ:AAPL) are plowing resources into the development and commercialization of AR hardware and software, a strong IP portfolio could be a real asset not just from a protection standpoint but also with regards the company's ability to potentially leverage its technology through licensing arrangements going forward.

That's the commercial side of things but there is also another product that has the potential to really draw consumer interest towards the company during the coming 12 months and, in turn, could help Vuzix expand on its current industrial client base.

The product in question is called the Vuzix Blade and, again, rather than try and explain the aesthetics of the device, it's best to show it. Take a look at the image below:

Source

There is also a pretty neat video here highlighting the features and capabilities of the Blade smart glasses, put together by the company itself in anticipation of a launch at the CES technology conference, which is set to take place in Las Vegas in January 2018.

Essentially, it is a smartphone built into a set of glasses and viewable through the wearer's lens. The company is going with the tagline "leave your phone in your pocket", which serves to pretty neatly sum up the target consumer use-case for the Blade smart glasses.

Now, of course, it's in the consumer space that Google failed, but that doesn't necessarily mean that Vuzix and, specifically, Blade, is doomed to the same fate. The glasses are noticeably different from an aesthetics perspective and from a hardware point of view they are far more advanced than the early Google Glass prototypes.

To support this statement, this technology is already picking up industry recognition.

On November 10, Vuzix announced that Blade has been awarded four International CES Innovation 2018 awards, spread across the areas of Fitness, Sports and Biotech; Wireless Handset Accessories; Portable Media Players and Accessories as well as Computer Accessories.

When considered against the fact that Blade hasn't even launched yet (and, indeed, it is intended to do so at CES, the conference at which it's going to pick up these awards), that's a pretty strong early validation of the product's potential.

While AR is very much a hot topic right now, it's really difficult to get across just how game-changing it could be longer-term. The Blade smart glasses are a real step forward towards bringing about the leaps forward in technological capability that AR promises but, again, it's difficult to describe exactly why and what this means.

One way to get an idea is to take a look at this video, recorded by Vuzix COO Paul Boris, who previously served as VP of Manufacturing Industries, GE Digital at General Electric Company (NYSE:GE) and Global VP at SAP SE (ADR) (NYSE:SAP).

In the video, Boris hooks up his prototype Blade smart glasses to a laptop in order to enable us to see what he's viewing and downloads an android application that has been created by a team at the Harvard Business Review. He then views an image published in the print version of the Harvard Business Review through the glasses and the image comes to life. Seriously, it's almost impossible to describe what this really looks like using words alone so it's well worth taking a look at the video for anybody who genuinely wants to get an idea of the capability of this sort of technology, even at its early stages.

By way of a quick look at the numbers, Vuzix generated a little over $1.4 million in revenues during the third quarter of this year, up 141% on the comparable quarter during 2016. Net loss for the period came in at a little over $5.5 million.

Cash on hand sits at around $8.7 million, negating any near-term dilution risk, but there is always the potential for an equity raise going forward especially given that this company is pushing into a high-growth industry near term.

All said, this is a company that flies under the radar of many traders and investors based on the fact that it is operating in an industry currently dominated (from a consumer awareness perspective) by household names - Facebook Inc (NASDAQ:FB), Apple, Sony Corp (ADR) (NYSE:SNE) etc.

This under the radar status is far from representative of its positioning in the sector, however, and it can only be a matter of time before wider markets switch onto the success Vuzix has already enjoyed in AR and the implications that this early success has for the company's growth potential going forward.


This article was written by Luke Douglas for on .

This article published in collaboration with Scutify, the best app for traders and investors. Download the Scutify iOS App, the Scutify Android App or visit Scutify.com.

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