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After announcing its intention to acquire the software company Comhear, WiSA Technologies, Inc. (NASDAQ: WISA) quickly gained momentum – running over 100% on the news. Since then WISA stock has settled near $1.30. Considering its incredibly low float of 3.79 million shares, now could be an opportunity for patient investors to take a position ahead of its upcoming catalysts.
WISA Stock News
Although its a small company, WISA is a leader in audio tech solutions. While WISA produces its own products, premium audio brands like Bang and Olufsen, Harman, Klipsch, KEF use its technology as well because its WiSA HT standard enables products of different brands to work together.
As is the company is preparing to release new products such as the Platin Audio’s Rio 5.1.4 Soundbar and other designs. WISA anticipates that it will report strong revenue growth in the second half of the year as it replenishes its customers’ inventories and produces its new products.
While WISA was negatively impacted by slowing consumer demand in Q1 2023, it believes that it will achieve full year revenue growth in 2023 thanks to strong demand in 2H 2023. This could be due to seasonal demand from a number of holidays later in the year.
According to WISA its industry as a whole experienced lagging demand during this period as it is a seasonally slow period for consumer electronics. But the company remains confident that it is in a strong position to scale this year now that it has paid off the outstanding balance of its Senior Secured Convertible Note.
Looking further down the road, WISA expects its 2024 revenue to be in the range of $10 to $15 million partly thanks to its plans to acquire Comhear Inc. in Q3 of this year. In 2022 the company suffered setbacks in its component revenue which contributed to a 49% revenue decrease YoY. As a result, its full year revenue in 2022 was $3.36 million. If the company successfully completes its acquisition of Comhear it could create a notable improvement in the company’s finances. .
WISA is also expecting revenue growth in 2023 due to its new product releases. That, coupled with WISA and Comhear expecting to enter a more definitive agreement in June and completing the acquisition in the third quarter of the year, can make WISA’s revenue grow by more than double.
Comhear Inc. LOI
After signing a non-binding LOI to acquire Comhear Inc., a developer of AI-enabled adaptive audio technology, WISA stock spiked on the news. The stock not only benefited from the recent interest in AI stocks and AI technology, but investors likely found the synergies between both companies to be a bullish sign.
As a software company specialized in using AI to optimize audio for each individual, Comhear has utilized its adaptive audio technology in kiosks, VR headsets, and home entertainment. Since WISA specializes in home entertainment systems and other applications, it appears that Comhear could add significant value to its business if the acquisition goes through.
The acquisition is expected to close by Q3 2023 and become accretive in the next quarter. While shareholders may vote on approving the acquisition in July, at this time there is no guarantee that the transaction will be approved since both parties are conducting their due diligence.
This acquisition would not only drive revenue growth – potentially increasing revenue by 197% to 346% compared to 2022 – but bring new assets to the company as well since Comhear’s business model is also driven by audio IP, licensing, and module sales. As is, there are many ways WISA can monetize Comhear’s intellectual property using its existing customer base.
The acquisition also would not be a burden on WISA’s capital, as under the proposed acquisition, WISA would acquire all shares of Comhear common stock in exchange for newly issued shares of WISA common stock. Although, this will result in dilution for existing shareholders this deal will help WISA preserve capital.
WISA Stock Financials
Setting aside its potential acquisition of Comhear, WISA expects full-year revenue growth in 2023 compared to 2022 despite recording a 16% drop in Q1 revenue growth YoY. However its important to note that this decline was mainly attributable to a $1.3 million increase in inventory reserves.
In its Q1 2023 report, WISA reported $12.5 million in assets, including $5.2 million in cash and cash equivalents. This quarter marked a QoQ increase in its assets from $2.9 million in cash and cash equivalents and $11.4 million in total assets in Q4 2022. WISA’s total liabilities also declined YoY from $13.4 million to $4.8 million, and its current liabilities stand at $2.1 million.
Revenue declined YoY from $566 thousand to $469 thousand, while gross profit decreased from $62 thousand to a deficit of $1.2 million due to a 124% increase in cost of revenue. Operating losses also increased YoY from $3.9 million to $5.8 million, while its net loss improved from $3.9 million to $0.92 million.
From April till now WISA stock has traded in a sideways channel between $.97 and $1.70 . Overall the trend is neutral. While WISA stock tested its resistance at $2.66 it failed to break through. Now, profit taking and declining volume has pushed WISA stock back into its channel
WISA stock is trading below the 50 MA and above the 200 MA. Its currently testing the 21 MA after retesting the 200 MA several times. Although a golden cross recently formed, the 50 and 200 MAs are drawing closer for a second crossover. Looking at the indicators, the RSI is neutral at 42 and the MACD is bullish but approaching a crossover.
Fundamentally WISA has some upcoming catalysts since investors can expect more news on its LOI to acquire Comhear soon. If approved, shareholders will have the opportunity to vote on the acquisition this July. While the acquisition will ultimately be dilutive, if the acquisition is finalized then WISA stock could reflect higher revenues in 2024.
WISA Stock Forecast
Right now, the WISA stock forecast ultimately depends on the outcome of its Comhear acquisition. Since the company is projecting a substantial revenue increase as a result of the acquisition, WISA stock may be one to watch this year and next.
Considering its low float of 3.79 million shares, taking a position ahead of potential catalysts could also pay off as this run up has illustrated. However, investors should be aware of the dilution risks this acquisition may present if approved.
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