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Accordingly, this document should not be construed as an endorsement or recommendation of the companies or securities discussed herein. I am not an investment advisor and this is not an investment thesis. It is merely one part of the story, which I present for debate in hopes of determining all risks and upside potential. The disclosure at the end of this piece is critical to understanding the content of this document. Further, I frequently trade my positions and may buy, sell, or short the securities mentioned herein at any time, regardless of the facts or perceived implications of this article.
Leading things off, SMSI / Sprint’s Safe & Found app has been updated. The list of upgrades include the following, per Google Play:
1. Addressed user concerns regarding permission setup. This is now only needed when setting up Parental Controls (i.e. on children’s devices).
2. Wipe and Lock features are now optional (which means device admin permission can be skipped). This feature can now be turned on/off in settings menu.
3. Support for Android 8 and Wear OS 2. This augments the company’s IoT aspirations for the app, augmenting my personal belief that Safe & Found will be able to track anything (not just your loved ones) by the end of next year.
The implications of this are potentially significant. LoJack was acquired for $134 million for its car tracking capabilities. Absolute Software achieved a peak valuation of nearly $500 million thanks to its LoJack for Laptops offering.
If I’m right, SMSI will enable the tracking of cars and laptops… along with loved ones, pets, and virtually any other valuable (bikes, handbags, etc) where you can hide a small carrier-signal transmitter.
That’s the power of IoT !
Of course, SMSI won’t be able to offer all of the functionality that LoJack offered for cars, nor what Absolute offered for laptops, but it will enable you to track anything you want from one application (theirs).
Of course, many other vendors will be able to develop this capability. However, SMSI is out front with its combination of IoT expertise, already-developed app, and carrier relationships.
For SMSI, $134 million would equate to around $6 per share, while $500 million would equate to something closer to $20. It’s hard to compare SMSI’s apples to LoJack’s oranges, to Absolute’s peaches, but this gives us an idea of the potential that comes with providing security / tracking for specific valuables.
4. Possibility to customize which websites to block or allow. Aside from improving the user experience, this is the biggest functional breakthrough. Being able to control which apps your kids use (and when) is a godsend unto itself. Adding the ability to limit which websites your kids visit is going to make a difference, especially since all of these things (tracking, application control, and website white/blacklisting) can be managed from a single application… Safe & Found.
These are all important enhancements. They directly address the small percentage of negative reviews they’ve been receiving (validating what I’ve said about software development being able to offset customer satisfaction). I (and other readers) have personally seen reviews about Wipe/Lock and permission setups.
Well, this update should put an end to that. Indeed, the reviews have shown a noticeable improvement (coinciding with its sudden rise up the download charts) from 2.57 on May 1… to 3.05 on May 7… to 3.31 on May 14… to 4.43 yesterday (though I caution that the sample size is small and subject to manipulation, both positive and negative).
The enhancements also add to SMSI’s leadership in the space. Its previous release was already more functionally-rich than its carrier-centric competitors, as illustrated by one of Spence Watson, one of our reader / contributors:
Not only do I love the chart, I love the fact that this blog is accomplishing its goal of 1) spurring folks to do real in-depth research and 2) bringing investors together to do it together here!
Moving on, I’ve discovered that Safe & Found is now being offered for free to AAA customers!
This is good news for SMSI, because they collect a fee on every Sprint Safe & Found subscriber, regardless of what Sprint (or any of its partners) charges (or earns) from it.
Based on my due diligence, SMSI gets a fixed fee for each standard Safe & Found subscription, regardless of the functionality they develop. That sounds like bad news. However, their efforts to add functionality will be rewarded via 1) a tighter relationship with Sprint and 2) enticement for other carriers to sign with SMSI, and 3) additional license fees for customers expanding beyond the standard 5-device plan.
As support and use expands into pets, cars, etc, it will increase the number of devices per subscription plan.
It will also expand SMSI’s prospect base beyond families to include anyone who wants to track their valuables from a single app. Of course, there’s lots of competition on that front, but SMSI will have the advantage of having Sprint (and other carriers) marketing their solution.
This week’s update doesn’t just augment SMSI’s product, it also signals the coming of several catalysts, per management’s commentary on their Q1 conference call”
“…new marketing initiatives will coincide with some significant upgrades planned for the core SafePath Family platform…
Currently in development, the next major release of SafePath will introduce a new, family-centric user experience that further extends the platform beyond a location focused service.
With the next release, SafePath will evolve to a digital lifestyle management platform for the entire family that will provide enhanced location services, easy to use parental controls, powerful web filtering functionality and built-in support for new IoT products and services.”
Key phase — “new marketing initiatives”. CEO Bill Smith said that the upgrade would come first and be followed by new marketing initiatives from Sprint.
With this marketing, I would expect that the sunset date remains on track to occur in the coming weeks. This coincides nicely with the anticipated launch of analyst coverage from Chardan and SMSI’s upcoming appearance at the LD Micro conference on June 4.
Following that, I’ve heard that SMSI will travel to do an investor roadshow in NYC this summer.
Sounds like a fun summer!
Additional Data Points:
A reader/contributor chimed in with, “Liquidity seems to be drying up. Interesting that the stock was on the SEC REG SHO list from 4/30 to 5/9 (which made it) tough to borrow stock to short. Once off list it tanked on 5/11 and 5/14 (it was) easier to borrow once off list so guys shorting had (the chance) to catch up. Just a guess.”
A Wall Street professional recently spoke with the company and came away bullish. There’s optimism that EPS of $0.10 is a possibility for Q4. If that comes to pass, investors will have an easy time seeing 40-cents for 2019 (or even my current 50-cent estimate).
Put whatever P/E you want on that, keeping in mind that this is subscription (recurring) revenue. Of course, there’s customer concentration risk to consider, but every successful company starts with a single satisfied customer.
I’m confident that the ongoing momentum at Sprint will soon enable SMSI to focus its attention on securing other carriers. The success and knowledge they’ve gleaned will make it a much easier sell than it would have a year ago (without the distraction and resource-drain it would have caused).
As a reminder, here’s a list of the world’s largest carriers from my original blog post on SMSI. As you can see, Smith’s eight-figure win at Sprint might merely represent a tip-of-the-iceberg type of deal because Sprint garners just 3% of the wireless carrier market worldwide.
- China Mobile (China: ~850 million customers)
- Verizon (US: ~150 million customers)
- AT&T (US: ~140 million customers)
- Vodafone (UK + 25 countries: ~450 million customers)
- Nippon Telegraph & Telephone (Japan)
- Softbank (Japan)
- Deutsche Telekom (Germany & 50+ countries: over 100 million customers)
- Telefonica (Spain + 20 countries: over 300 million customers)
- America Movil (Mexico / Latin America: ~280 million customers)
- China Telecom (China: ~200 million customers)
Indeed, they’ve already attracted deals and agreement from numerous carriers in Europe, Asia, and Latin America. Of course, these are all in various stages of development, but some of them are already live (one of my older posts shows this).
With the latest update and Sprint seemingly approaching auto-pilot, it’ll be interesting to see how these relationships progress in the coming quarters.
- SMSI Q1 Results: Sprint Ramp Confirmed & T-Mobile Discussed!
- “Top Ten Stocks” Update (and note to HMNY watchers): AMC & GAIA Report Stellar Earnings!
- Are SMSI’s Unlocked / Hidden Assets Worth Over $20 Per Share?
- HMNY’s ATM Offering: Where’s The Stock Going Next?
- Smith Micro Raises $7 Million (At A Premium) To Accelerate Its Momentum
- Videocast: AEHR 10-Q, MoviePass Update
- AEHR Grows 175% — Beats On The Top & Bottom Line (Buying More)
- GAIA vs. MoviePass: CAC Shows Which One Is A True Mini-NFLX
- Major Update on SMSI
- SMSI’s Safe & Found App: 100,000 Downloads & Counting
- MoviePass Projected To Burn $600M In 2018
- SMSI: Riding A New Trend & Making Its Latest Comeback
- Mark Gomes Research
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Disclosures / Disclaimers: I am long SMSI. However, this is not a solicitation to buy, sell, or otherwise transact any stock or its derivatives. Nor should it be construed as an endorsement of any particular investment or opinion of the stock’s current or future price. To be clear, I do not encourage or recommend for anyone to follow my lead on this or any other stocks, since I may enter, exit, or reverse a position at any time without notice, regardless of the facts or perceived implications of this article.
I am not a financial advisor. Nor am I providing any recommendations, price targets, or opinions about valuation regarding the companies discussed herein. Any disclosures regarding my holdings are true as of the time this article is written, but subject change without notice. I frequently trade my positions, often on an intraday basis. Thus, it is possible that I might be buying and/or selling the securities mentioned herein and/or its derivative at any time, regardless of (and possibly contrary to) the content of this article.
I undertake no responsibility to update my disclosures and they may therefore be inaccurate thereafter. Likewise, any opinions are as of the date of publication, and are subject to change without notice and may not be updated. I believe that the sources of information I use are accurate but there can be no assurance that they are. All investments carry the risk of loss and the securities mentioned herein may entail a high level of risk. Investors considering an investment should perform their own research and consult with a qualified investment professional.
I wrote this article myself, and it expresses my own opinions. I am receiving no compensation for it, nor do I have a business relationship with any company whose stock is mentioned in this article. The information in this article is for informational purposes only and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action.
The primary purpose of this blog/forum is to attract new contacts with professional industry expertise to share research and receive feedback (confirmation / refutation) regarding my investment theses.