Socket Mobile: An Amazing Economy Re-Opening Play

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Socket Mobile: An Amazing Economy Re-Opening Play

Socket Mobile is a leading provider of mobile data capture solutions. Its products include stand- alone barcode scanners, attachable barcode scanners, and RFID/NFC readers/writers. The primary end markets for its solutions are retail, commercial services, logistics, and healthcare.

 

September 9, 2021

Price (as of close on Sep 8, 2021)

$6.81

 

Rating

BUY

 

Price Target

blocked

 

The Company announced strong Q2:21 results, delivering its fifth consecutive quarter of operating profitability. Revenue rose 119% YOY. Management expects growth to remain strong in the near term led by retail as the economy re-opens. We increase our target price to blockedblocked) and maintain our rating at Buy.

 

sckt 2q f 2021

 

Q2:21 Highlights

➢Q2:21 revenues were $5.9 million, up 119% from Q2:20 driven by strong demand in the retail industry from the re-opening of the economy following the ease of pandemic restrictions.

➢ Gross profit for Q2:21 was $3.2 million, compared to $1.3 million in Q2:20. Gross margin increased 460 bps YOY to 54.6% in Q2:21.

➢ Adjusted EBITDA was $1.2 million in Q2:21, versus a loss of $0.5 million in Q2:20 due to higher revenues and lower operating expenses (as a % of sales).

➢ Net income was $2.6 million in Q2:21 or $0.27 per diluted share versus a loss of $0.7 million or $(0.13) per diluted share in Q2:20.

➢ SCKT expects its NFC reader products to generate meaningful revenue from 2022 onward.

➢ We adjust our estimates based on the quarter end results and management’s commentary. We increase our target price to  blockedblockedblockedblocked We maintain our rating at Buy.

 

PRIMARY RISKS

➢The Company is highly dependent on application developers to integrate SCKT’s scanning products into their applications. If these applications are delayed or are unsuccessful, it could result in less business for the firm, thereby negatively impacting sales.

➢The sales are dependent on a limited number of distributors. Thus, the loss of any one distributor may have a material adverse effect on future operating results and financial conditions.

 

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