Why is Energous (WATT) Stock Price on the Rise?

It’s been a couple of years since we explored the wireless charging technology space. We weren’t too bullish on what had been touted as the leader of the RF pack of wireless charging startups, Energous Corp. (NASDAQ:WATT). Energous had just gone public, and we didn’t like what we saw at the time, saying the stock seemed “highly speculative as the company has no granted patents, a prototype that is too large, just a small amount of cash on hand, no revenues, and some transactions in the past that could be considered conflicts of interest.” Those comments came while reviewing wireless charging competitor Powermat, which relies on more mature electromagnetic inductive technology.

Fast forward to January 2017: The San Jose company’s stock is trading over $18 a share, more than triple from where it opened on Jan. 1, 2016. At the end of the third quarter, it had $25 million in cash and cash equivalents with no debt. Revenue is still modest, to say the least, at about $1 million, versus $11.1 million in operating expenses, mostly spent on R&D. Energous President and CEO Stephen R. Rizzone said in the third quarter of 2016 that the company would reach cash flow break even in the 2017 third quarter. Of course, that’s what CEOs are paid to say.

And our qualms over patents? As of the end of September 2016, Energous had in excess of 250 pending patent applications in the United States and abroad. It has received its first nine patents and been notified that seven additional applications would be allowed by the U.S. Patent and Trademark Office. It also appeared to win a key victory in 2016 against wireless charging competitor Ossia Inc. Ossia had challenged Energous’ U.S. Patent No. 9,124,125, which is one of several patents related to its systems and methods for wireless power transmission. The U.S. Patent Office’s Patent Trial and Appeal Board rejected to review 16 of 18 claims against the patent. Instead, the board is reviewing only two claims based on how they were written.

The last few months have also been a time of wheeling and dealing for the company. In November, Energous announced a partnership with Dialog Semiconductor plc (XETRA: DLG). A manufacturer of energy-efficient, highly integrated, mixed-signal integrated circuits, Dialog agreed to make a $10 million investment in Energous and become the exclusive component supplier of its wireless charging technology known as WattUp. The first week of the new year started off just as hot for Energous. JT Group, a telecommunications company with more than 600 employees, is making a $5 million investment in Energous, buying it a position to be the preferred backhaul and cloud connectivity partner for Internet of Things customers that leverage WattUp technology. The very next day, Energous announced it also formed another strategic partnership and technology integration with PERI Inc., a small consumer electronics startup focused on Wi-Fi audio and power space components and accessories.

Energous Mini WattUp. Credit: Energous

Does all that add up to a hot stock? Well, add in rumors—rumors as unsubstantiated as Trump enjoying certain water sports with Russian prostitutes—that Apple is a potential partner and you have a stock on a bull run when investment analysts have turned bullish.

Still, Energous may have difficulty building momentum. There are already wireless charging stations in places as diverse as Starbucks and Ikea furniture stores. Most of these stations use inductive or resonant chargers, which create an electromagnetic field to transfer energy to your smart phone or another device to power it up. A transmitter coil in the charger generates the magnetic field, which a coil in the mobile device converts into an electrical current. The big drawback is that the transmitting and receiving coils have to be in pretty tight alignment. They don’t have to be touching but generally need to be pretty darn close, especially for inductive chargers.

On the other hand, RF wireless charging technology like that being developed by Energous, means more freedom. Freedom, in this case, equals distance from the transmitter. They create power via radio frequencies to a receiver in the device to be charged. The idea here is that you have a transmitter in your home, say the kitchen. You can have your phone and tablet (with the requisite receiver chip) sitting unplugged on the counter while texting friends for dinner and looking up recipes on the tablet, all while your devices are wirelessly receiving juice. However, there’s really no public infrastructure out there to support RF wireless charging when WattUp goes to market.

Which brings up our final point: Not one WattUp transmitter has yet to be sold. However, PC World reported that since receiving FCC certification for “contact-based” charging, Energous plans to release a Mini WattUp transmitter this year that can charge devices positioned within a few millimeters, much like a Powermat device. A mid-sized transmitter would reportedly follow later this year as well, charging from a distance of two or three feet. The full-scale WattUp, capable of wireless charging from 15 feet away, is probably still a year or more away from reality.

If things go according to plan, Rizzone’s third-quarter prediction might not be too far-fetched. The bottom line, though, is it time to invest in WATT shares? The stock seems high—hell, the whole market seems a bit bubblish—for what you’re buying: lots of speculation and $31.2 million in losses for the first nine months of 2016.

Still, wireless charging technology 2.0 promises to be disruptive. Next week we’ll look at five startups that are working to put more distance between you and the power outlet.

Pure-play disruptive tech stocks are not only hard to find, but investing in them is risky business. That's why we created “The Nanalyze Disruptive Tech Portfolio Report,” which lists 20 disruptive tech stocks we love so much we’ve invested in them ourselves. Find out which tech stocks we love, like, and avoid in this special report, now available for all Nanalyze Premium annual subscribers.

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