Ondas Holdings Is Another Small-Cap Winner and Things Are Improving
The wireless, drone and automated data solutions provider could be poised for some more gains.
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About a week ago, ahead of earnings, at reader request, we covered Ondas Holdings (ONDS) here at the "Stocks Under $10" daily column.
I have not gotten a chance to get back to those earnings since, given that I was out a couple of days last week and I had to touch base on SoFi Technologies (SOFI) and Rocket Lab (RKLB) early this week after the beatings that those two stocks had taken.
Readers may recall, or those who missed that piece might not know, that Ondas is a provider of wireless, drone and automated data solutions through the firm's wholly owned subsidiaries. The Boston-based company operates through two segments. Those would be Ondas Networks and OAS. Ondas Networks is a provider of wireless connectivity that enables mission-critical industrial internet applications. The OAS segment integrates drone-based solutions with a focus on high-performance, critical applications governmental and Tier-1 commercial clientele.
The Quarter
For the period ended September 30, Ondas posted a GAAP EPS of -$0.03 on revenue of $10.1 million. The top-line print crushed expectations by more than $3 million, while the bottom-line number beat Wall Street by two cents per share. That revenue print, though a small number, was good for year-over-year growth of 582%.
For the quarter, the firm boasted a gross profit of $2.604 million, up from the year-ago comp of $47,600. Operating expenses grew from $8.661 million to $18.108 million. This left an operating income/loss of -$15.504 million, down from -$8.661 million. After interest, non-operating income and expenses and taxes, GAAP net income/loss printed at -$7.481 million, up from -$9.526 million. This worked out to -$0.03 per fully diluted share, up sharply from the year ago comp of -$0.15.
Guidance
The firm is now targeting full-year revenue of at least $36 million, up from prior guidance for at least $25 million and well above the Wall Street consensus for just $21 million. The firm is targeting at least $110 million in revenue for full year 2026.
Balance Sheet
At the end of the quarter, Ondas ran with a cash position of $434.312 million including restricted cash and certificates of deposit. The firm also had $12.523 million in inventories. That led to current assets of $478.876 million. Current liabilities add up to $31.308 million, including $11.024 million in short-term debt, most of which is convertible, so dilution is a threat.
The firm also has current deferred revenue of $2.098 million on the books. This makes for an incredibly strong headline current ratio of 15.29. Once adjusted for those deferred revenues, the ratio rises to an even more robust 16.39.
Total assets amount to $550.151 million. Goodwill and other intangibles make for $62.895 million. At 11% of total assets, this is not a concern. Total liabilities less equity comes to $39.776 million, which includes just $300,000 in longer-term debt. This is a truly impressive balance sheet.
My Thoughts
I told readers a week ago that I thought that ONDS was worthy of speculation. I bought the stock. The stock was trading at $5.60. It closed last night at $7.84. That's already a pop of 40%.
Readers will see that ONDS has broken out of the falling-wedge pattern of bullish reversal that we took a look at last week. The stock has retaken its 21-day EMA and is currently struggling to take and hold its 50-day SMA. I will be exiting from at least half of my long position should the shares fail at that thin blue line. That does not mean that I don't think the stock is going higher. That's just discipline.
In the meantime, both relative strength and the daily MACD are both in much better shape than they were last week.
At the time of publication, Guilfoyle was long ONDS, SOFI and RKLB equity.
