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NASDAQ:POET
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Despite the performance of the stock price, POET (NASDAQ:POET) continued to make technical progress in Q2 and attract more actual and potential customers. It announced the availability of samples of its 400G FR4 and 800G (2x400G FR4) Receive (RX) Optical Engines as well as its 200G FR4 Transmit (TX) and Receive (RX) Optical Engines. The company has a number of customers who are actively designing products using POET’s platform. They are designated “Contracted” or “Committed” on the chart below. The others that are labeled “Engaged” have taken samples on an evaluation board and are analyzing POET’s platform. The chart also shows that for packaged light source products, both the SPX joint venture and POET expect to book revenues. This is because POET will design and provide custom packaging for the customer, and SPX will manufacture and provide the engine—in effect acting as a subcontractor.
Once the first customers have product available, future sales should be much easier as the technology will be proven and the question of price and performance will be settled. Given the advantages, industry players could then quickly move to adopt POET’s platform just to stay competitive. In addition, 100G customers will have already done the hard work and can more easily migrate to faster speeds. POET’s solution becomes increasingly more competitive at 400G and once it reaches 800G and above its solution seems to be the ONLY solution due to size constraints and complexity.
POET’s business model would make it similar to fabless semiconductor companies. The group we look at now trade at 6.9xs enterprise value to estimated 2022 revenues. Currently POET trades at an enterprise value of $147 million using a fully diluted share count. We need to look further out to where we think revenues would be by 2025. If we say the joint venture is able to reach $200 million in revenues by then and the rest of the business can ramp to $100 million that would be $200 million in revenues for POET in 2025. Using 6.9xs gives us an enterprise valuation of $1.4 billion. Today’s fully diluted share count is 42.0 million shares. We know that the company will probably raise money next year so we are adding 3.75 million shares to the total ($30 million at $8 per share.) $1.4 billion divided by 45.75 million shares is $30.15 per share by 2025. This would be a present value of US$13.75 or CN$17.70 per share discounted by 30% per year.
Q2 2022 Earnings Report
Q2 revenues were $120,261 and came from NREs paid by AI Celestial versus NRE revenues of $209,100 in Q2 2021. We expect the company to book NREs again in Q3 and Q4. In Q4 we also expect POET to finally book product revenues which are expected to come from selling beta samples to AI Celestial. We also expect the joint venture to start booking revenues from the first of its ten customers in Q4 which will be reported separately on the SPX joint venture income statement.