Since its quasi-IPO on Aug. 31, Focus Universal (NASDAQ:FCUV) has done nothing but soar. I say quasi-IPO because FCUV stock was listed on a smaller exchange before publicly listing on the Nasdaq Exchange Aug. 31
In any case, early massive price swings are fairly common for IPOs and are not reason enough to rush out and establish a position.
However, there is certainly reason to remain cautiously optimistic about the company’s chances moving forward. Because with big risk — Focus Universal certainly has it — comes big reward.
Let’s ignore the fact that FCUV stock has more than tripled since Aug. 31, and instead look at the company and what could propel it upward. Because there are simply too many unknowns associated with IPO pricing to judge much from its early success.
Plenty of Potential With FCUV Stock
Focus Universal is an established firm in an emerging growth sector. The company focuses on hardware at the confluence of the Internet of Things (IoT) and 5G.
To understand what Focus Universal does within those niches, investors must understand two pieces of technology that the company develops: Universal Smart Instrumentation Platforms (USIPs) and Universal Smart Devices (USDs).
A USIP allows users to monitor and control functions of devices through a mobile phone or computer.
Or, as the company explains: “The USIP utilizes a mobile device or computer to communicate with smart devices (sensors, probes, controllers) to monitor and control any functions, thus replacing traditional instrument hardware. The smart app interface supports real-time data monitoring facilitates instrument control and operation. A wireless data logger (Ubiquitor) acts as a bridge between the smart device and sensor data acquisition module. The Universal Smart Controller (USC) allows you to control any device by plugging the sensors into the platform using your smartphone.”
The company also manufactures USDs through third parties. Basically Focus Universal hopes to become a major player in connecting you to your devices through IoT technology and your phone.
Entry Into IoT
IoT and 5G hold a lot of potential and promises for changing our world. However, the nascent sector is far from proven, and success is not guaranteed. As the company noted in a presentation from July, “There is a risk that the market will not adapt to using the smartphone readout as a substitute platform for sensor devices, causing our products to fail in the marketplace.”
Focus Universal is a company that will create unproven products in a market with unproven demand. Investors truly shouldn’t underestimate the risk involved with what the company is attempting to do.
The company is outsourcing production, therefore it runs the risk of intellectual property theft. In short, there’s a laundry list of things that could go wrong.
But on the other hand, if the company’s devices and platform succeed in a future where IoT becomes more prevalent, the sky’s the limit. It is estimated that there could be 24.1 billion connected IoT devices by 2030. That could lead to $1.5 trillion in IoT revenues by 2030, up from $465 million in 2019.
Focus Universal could grow into something much bigger than what it is now. And it clearly isn’t insignificant in a market with those projections.
The company’s asset base is growing, up 11% since the end of 2020. That same period has seen its cash position increase by 137%.
The company is in a stronger position financially, but failed to reach the $1 million revenue threshold in the first six months of 2020 or 2021. In both of those periods the company recorded a net loss in excess of $1 million. That’s not terribly high.
The company doesn’t seem to be problematic based on its financial statements. It isn’t taking on massive risk, it’s simply attempting to grow and struggling. The point here is that Focus Universal could hit or miss. I see little reason for it to drop drastically, and plenty of upside. So for those who want to invest in early IoT growth, FCUV stock might make sense.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Alex Sirois is a freelance contributor to InvestorPlace whose personal stock investing style is focused on long-term, buy-and-hold, wealth-building stock picks. Having worked in several industries from e-commerce to translation to education and utilizing his MBA from George Washington University, he brings a diverse set of skills through which he filters his writing.