Still a quiet sub-current in the public markets, investment money is pouring into connected devices and the internet of things.
SoftBank's $32 billion purchase of ARM Holdings exemplifies this investment in the future of connectivity, but few pure-play companies exist.
Solbright Group (SBRT) has a growing revenue base, an entire potential pipeline of new business after recent acquisition, and could see a double in share price based on current sales trends alone.
Masayoshi Son isn't a household name, though many will recall President Donald Trump, during the 2016 campaign, appearing in NY's Trump Tower lobby with a wealthy Asian investor and businessman who pledged $50 bln in investment dollars to the U.S. The Trump team lauded the commitment as a sign of confidence in Trump's United States.
And Son is legendary. He's CEO and Founder of Japan's SoftBank Group, a visionary and long-term thinker, and his $100 bln SoftBank Vision Fund is making immense bets on the future of connectivity: from autonomous vehicles to taking a majority ownership stake in Sprint (NYSE: S). One of his biggest bets today? The future Industrial Internet of Things (IIoT).
Despite the huge potential of this emerging market, many public-market investors aren't aware of the possibilities, and few pure-play companies exist through which to bet on this industry. Solbright Group Inc (OTCMKTS: SBRT) is an exception, with a revenue-generating business and a long-term plan to ramp up their high-margin IoT business - with compelling growth potential and the right execution, this little company could be worth 2x or more within a year.
SoftBanks's $32 Billion Dollar Bet On Connectivity
In 2015, Son's SoftBank made the rapid and transformative acquisition of ARM Holdings for $32 bln. ARM develops the chips and semiconductors found in everything from your iPhone to the Nest smart thermostat, and the company has its chips in about 90% of all smartphones on the market.
As a major player in the smartphone sector, ARM's businesses had been good; the company's stock price prior to the SoftBank takeover had already more than quadrupled in five years.
But Son's vision isn't cell phones. The ARM acquisition appears to be pinned on the future of network-connected devices of all kinds: the "Internet of Things." ARM's CEO Simon Segar said in a Wired Interview last year about Son, who now controls ARM under the SoftBank umbrella, "Masa's view on life is way beyond the horizon of pretty much any investor you're going to come across. He's thinking of 30-year, 300-year time scales, so he's up for investing for huge growth in the future even if it means sacrificing probability today."
According to wired, more than half of the new licenses that ARM signed with new customers in one quarter of 2016 were for its Cortex-M class of processor, "the kind that facilitates the microcontrollers, sensors, and low-power wireless communication chips that give "smart" devices a brain." Of its 16 licenses with new customers in the second quarter of last year, all but one was outside of the mobile ecosystem.
And there you have it. The same strategy that made ARM the world's leading provider of smartphone chips will help it do the same with connected devices. Research firm Grand View Research projects the market for connected devices, buildings, and cities at being worth almost two trillion dollars within 5 years from today. Investors will be scrambling for a piece of this market in short order.
Solbright Is Already Executing in IIoT With a New, Tremendous Pipeline of Business Potential
The number of pure-play companies in this emerging industry is small, but we think Solbright Group Inc (OTCMKTS: SBRT) could be a standout worth multiples of where the stock is priced today with continued growth. Solbright's core business is in installing and maintaining smart "IoT" infrastructure for business and municipalities, more specifically the company is tackling the "Industrial" IoT head on by accessorizing and implementing facilities, businesses, and even municipalities with smart sensors to improve energy efficiency and lower costs.
The company is already generating revenue, and with the recent acquisition of a mid-Atlantic solar installer called Solbright (the company has since taken the name), revenue has increased significantly and the pipeline of potential IIoT contracts as a result could mean huge growth on the horizon. Solbright is growing steadily, increasing their revenue by 25% year-over-year to $2.347 mln in fiscal 2017 (year ended May 31). But already in the first quarter of fiscal 2018 (ended Aug 31) the company has doubled that amount, with $5.278 mln in sales!
The market has yet to pick up on this revenue growth and what it means for the company: the IoT side of the business includes a SaaS component where clients continue to use the company's cloud software - with higher margins than the sales/service business. Solbright is betting on the expansions of Industrial IoT applications in the next 5 years. By lowering energy costs and streamlining efficiency for businesses and even municipalities, the company can easily justify small, residual costs to the customer. With the Solbright acquisition and their pipeline of installations, the company has an entirely new set of captive customers - why not add a smart component to a service install if it saves money?
This kind of business is attractive to the likes of SoftBank, and the company can justify a higher sales multiple based on sales of $5.278 mln in their fiscal 2018 1st quarter. The company could be on track to do $20 mln in fiscal 2018, or roughly equivalent to their current market capitalization! With growing revenue, a 2-4x sales multiple would put the company at closer to $80 mln in market capitalization if the company can continue to execute on growth, which means the stock could be due for a correction higher by 100 to 200%!
Own Small-Caps Before The Lightning Strikes
Here's what happens when lightning strikes and the markets pick up on previously unknown small-cap companies like SBRT: this week Acasti Pharma Inc (NASDAQ: ACTS) announced that a potential partnership is in the works with a leading Chinese pharmaceutical company, and the tiny ACST rocketed higher by 180% in the Monday trading session. Or take note of OptimumBank Holdings Inc. (NASDAQ: OPHC) which rallied 245% in just three days as traders took note of this small company. The quiet undercurrent of investments from mega players like SoftBank and even GE (NYSE: GE) into IoT could soon send SBRT ripping when investors take notice.
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