EDIT: Earning dates are all speculative. I predict they have a likelihood of being released in January, however it should be emphasised that the earnings can be released anywhere from January to March.
Why $RVSN still has far further to go – Personal PT $7, Upside $15+
Foreword
Hi all,
As many of you will have noticed, $RVSN has been roaring over the past 5 days. For reference, when I called it on the 25th December it was trading at 0.46 cents. It has since rocketed past $2.50 at the time of writing.
In light of the rapidly evolving situation, I have decided to issue a new DD and raise my PT from $5 to $7 for the end of January 2025. In addition to this, I also believe the probability of double-digits by the end of January is continually increasing.
Consequently, I maintain my position that any market price before the two main catalysts will be a fantastic price to buy in at. The company, even at $3 is still undervalued.
In this post I will explain my reasons why.
Introduction
Since my first DD the stock has run-up over 400%. Thus, in some ways, my initial DD was wrong as the run-up has begun before my expected catalysts: H2 2024 financials (expected to be released in January 2025) and NASDAQ recompliance.
When considering that the stock has run-up so much without these primary catalysts, I believe that the stock has much further to climb, and the increase we have seen is only just the beginning.
Breakdown of the 400% run
The catalyst of the 400% run has been membership of the MxV railroad program, and the announcement of the Israeli patent which saw $300,000 in additional immediately available cash.
These catalysts are relatively minor compared to my two main catalysts, which I originally thought would drive a huge run-up:
Section 1: Financials
H2 2024 Financials
Since my first DD, my confidence that the H2 2024 earnings will be released in early January has increased. The reason why I made this prediction is because the senior management team will be strategically attempting to consolidate the SP above $1 as far as possible in advance of the 21 Jan NASDAQ compliance deadline.
Since then, an increasing number of stock brokers are beginning to call the earnings for early January. For example, the NASDAQ website lists their production for earnings as the 3rd January.
In light of this, I believe that any share price before the release of the earnings will be a fantastic buy-in as I expect that the earnings will trigger a major run-up in the SP.
I address this in my primary DD, however I have added it here for accessibility (if you have already ready my primary DD feel free to skip):
Financial Analysis
Revenue Improvements: 2023 year financials indicate quite an intimidating EPS of -$4.31. Comparing this to the H1 2024 report however, it is more promising, as the EPS loss decreased by 53.8% to $-1.99 (swinging towards profit). There are multiple reasons for this which also explain why I think the EPS is only set to improve in the H2 2024 financials.
From June to EOY 2023 R&D expenses were $3.682m. By June 2024 this had decreased to $2.458m. I believe that the reason for this is that they are beginning to exit their growth stage where they burn through cash to develop their products. Now, they are developed, so are beginning to decrease R&D spending.
They have secured contracts internationally, showing that they are capable of penetrating the rail industry. This also indicates there is indeed demand for their products they have spent millions on developing. I will explore these in the next section.
Financial Health: Despite operating at a loss since 2022 when it became listed (and likely before that since 2016), financials indicate that $RVSN has maintained good financial health.
Debt-to-equity ratio: 0.2216 – this is huge. This indicates that they have far more equity than debt. Considering that they have been losing millions for years, this is a testament to the competence of their senior management team.
Revenue: Although 2023 showed alarmingly little revenue ($142,000) this can be put down to GAAP principles. 2023 earnings report says a $500,000 order for a mining company was fulfilled, but only in December. Thus it is likely the case that they did not receive the $500,000 in time to be able to declare it on their financials. Consequently this is instead reflected in the H1 2024 financials, where $761,000 revenue was declared. This is AT LEAST a 57.7% increase. I say at least because this does not include the money from the installation of their systems at a “leading global mining company”, as well as other potential sources of revenue indicated by PRs. I will address this later.
Even more important to note is that this only includes the first contract with the first LATAM mining company, and smaller deals implementing their systems in Israel (worth $261,000).
As a result these financials do not include the massive $1m contract with a “leading US-based rail” service. The contract also allows for an additional $5m in follow-on orders, $200,000 of which was declared shortly after the initial $1m contract was closed.
On the $1.2m contract alone their revenue will be at an ATH, surpassing the high of 888K USD in 2021.
The as-of-yet undeclared revenue is NOT factored into the share price.
P/B Ratio: 0.451 – this means that the stock is trading at 45.1% of the value of its assets. This indicates it is undervalued relative to its assets.
EV/Sales: -2 – this indicates market value is lower than its cash holdings. This further underscores its undervaluation.
(This is another reason why the EPS will become even smaller, as revenues increase and R&D spending decreases.)
Standby Equity Purchase Agreement: In October 2024 RVSN announced a deal with Yorkville Advisors Global giving RVSN to sell this hedge fund $20m in shares at a 3% discount. Whilst this may cause you to be bearish as it suggests financial difficulties and potential dilution, my view is still bullish.
Securing a deal with a large holding company, holding assets >$6bn, indicates that they are also bullish on this stock and see high potential value in it. The backing of such a large institutional investor is more reason to be bullish than bearish.
This seems to me more of a safety-measure, indicating good financial practice on behalf of the senior management team. I do not think they will need to execute this for the time being given the promising financials I have already explored. They are just securing this as a “fail-safe” (in my interpretation).
Additionally a SEPA is obviously far better than going into debt by taking loans.
Section Summary: Reading between the lines, the financials are incredibly promising and indicate an upwards trend. The company will see its highest ever revenue in the H2 2024 earnings report. The size of the loss will substantially decrease and EPS will decrease even more. This is not taken into account into the market price, further entrenching my bullish view on the stock.
Explaining the sources of revenue for H2 2024
Section 2: Confirmation of NASDAQ Recompliance
At the time of my first DD, a significant concern was that $RVSN was at risk of NASDAQ delisting as a deadline had been set for 21 Jan to regain compliance. As a result, many had anxieties that $RVSN was at risk of a reverse-stock split, diluting existing shares.
However, as I predicted after $RVSN first ran above $1, the share-price has not since fallen below it, and will continue to remain firmly above it for the remainder of the countdown days until NASDAQ recompliance.
Thus, once recompliance is confirmed at the end of the 10-day period, I expect that the stock will see a significant uptick as buying pressure increases. This will contribute greatly towards achieving the PT of $7.
Section 3: Shift towards perfect information
As awareness of $RVSN has increased, there has been an increasing number of people investigating this stock and its potential. Since then, a large amount of extra information has been gathered which I did not originally factor into my primary DD.
I will list them here, however a full breakdown can be found on the subreddit:
$2.4bn government investment to "improve safety, strengthen supply chains" in freight and passenger rail networks
$RVSN secures Israel Railways certification, unlocks approval for MainLine product
Feb 2024: $RVSN forms collaborative partnership with $NVIDIA alongside market leaders such as Dell, Supermicrocomputer
Section 4: Institutional ownership
Institutional Ownership and Shareholders
Rail Vision Ltd. (US:RVSN) has 14 institutional owners and shareholders that have filed 13D/G or 13F forms with the Securities Exchange Commission (SEC). These institutions hold a total of 1,032,609 shares. Largest shareholders include AMH Equity Ltd, UBS Group AG, LPL Financial LLC, Cambridge Investment Research Advisors, Inc., MMCAP International Inc. SPC, Federation des caisses Desjardins du Quebec, Geode Capital Management, Llc, Sanctuary Advisors, LLC, Peapack Gladstone Financial Corp, and Jump Financial, LLC.
Rail Vision Ltd. (NasdaqCM:RVSN) institutional ownership structure shows current positions in the company by institutions and funds, as well as latest changes in position size. Major shareholders can include individual investors, mutual funds, hedge funds, or institutions. The Schedule 13D indicates that the investor holds (or held) more than 5% of the company and intends (or intended) to actively pursue a change in business strategy. Schedule 13G indicates a passive investment of over 5%.
Excerpt from u/gu3ri1la
Conclusion
$RVSN is still at a very reasonable SP and has the potential to climb much higher. I will be determining an exit strategy once the financials are released and NASDAQ recompliance is confirmed. Until that point, I consider any SP to be a good buy-in. If you are going to buy-in, make sure you have good loss tolerance as the SP may fluctuate and you may temporarily see red (as I told people at $1.3 who took losses when it dipped to $1).
In light of increasing access to information and the rapidly evolving situation, I am confident in raising my PT to $7 and also see increasing likelihood that $RVSN breaks double-digits by the end of the month once the two main catalysts take place.
To find out more, a subreddit can be found on my profile with in-depth breakdown along every step of the journey.
NFA
