Mapping The Future

''At this point, I hope it is clear that not only have the bears been consistently wrong with this stock so far, but none of their current theories are sustainable either. So where does Uni-Pixel go from here? Why haven't the shorts covered?

Based on my conversations with various investors, it still seems as though many people are afraid that Uni-Pixel might be a scam or a fraud. It is impossible to prove that it isn't until Uni-Pixel has significant earnings, but I think most of us here want to make the correct investment BEFORE Uni-Pixel has significant earnings so that we can ride it up, not buy-in when it is already much higher. So is there any evidence that the company is or isn't a fraud?

I think that the clearest example that Uni-Pixel is not a fraud is who they have aligned themselves with. We know they have a "PC" partner and an "Ecosystem" partner. At first, some people said that they didn't actually exist, but we now know that the Ecosystem partner is Intel, as rumored (which also gives credence to the rumor that the PC partner is Dell). We also know that Uni-Pixel is working with Kodak. There have been many investors who said that Uni-Pixel is simply "leasing space" and that the partnership is meaningless, but we now know that Kodak has 40+ employees working full-time on InTouch, has dedicated ample resources, and considers touch, and Uni-Pixel specifically, a large part of their future. Furthermore, not only was UniBoss rebranded as InTouch, but as InTouch, Powered by Kodak. A little odd for a company like Kodak to put their name directly on a product that they think won't work, right?

On top of these three, there is also Synaptics (SYNA) who has mentioned Uni-Pixel by name on several occasions in a positive light. Synaptics admits to having tested InTouch and used it in prototypes and has been very pleased with the results. Why would the #1 Touch Controller company do that for a fraud?

And finally, we now have three different companies who have all tried and tested InTouch and decided that they want to buy it. This is three different companies that have performed extensive due diligence on the quality, the operations, the manufacturing, and the competition, and decided that InTouch seems the most interesting. And the shorts come out saying that these purchase orders don't actually exist, just like how "Dell" and Intel and Kodak don't actually exist. These three purchase orders not only prove that Uni-Pixel will be successful, but they also prove that InTouch is still very competitive at current pricing. Remember, nobody gets bonus points for being the first to a new technology that isn't any better than the old technology. If ITO is just as good as InTouch and just as cheap (or cheaper) and is tried, true, and tested for many years.... then why take a risk on a brand new company/technology?

Clearly Uni-Pixel is a legitimate company with a very competitive product that has a bright future. But how bright? In order to determine a fair price for the stock, not the company, we need to discuss future earnings.

Ramping It Up

We know that Uni-Pixel previously expected to sell InTouch for around $20 per square foot, but let's conservatively use $15 (for what it is worth, analysts don't seem to expect pricing to get this low until 2015, but it is good to be conservative). The cost to produce is very small, even with low yields, and we will estimate it is around $3 (again, conservative). This amounts to $12 profit, which is then expected to be split in some "equitable" way with Kodak. Uni-Pixel stated at one point that a 50/50 split is the absolute worst case scenario, and, to be conservative, we will stick with 50/50. This equates to $6 in profit for Uni-Pixel per square foot sold.

So how much can they sell? One issue investors seem to be having with the recent purchase orders is that it wasn't specifically disclosed how large they were. And yet, if you pay enough attention, the sizing is actually very apparent, at least at a minimum. CEO Reed Killion specifically stated that two of the POs are very small, and will only amount to around 100-150k units per year. One of these POs is for a 15" monitor type device whereas the other one is for a 23" AiO (All-In-One). It was also stated that the 3rd PO was "substantially larger" than these (and thus deserved a PR, implying that it is material while the other ones are not), so I will estimate that it is around 600k units per year. This amounts to around 700k units per year or $4.2M in gross profits.

Now, none of these numbers seem that large, but remember that these are all initial purchase orders for a new technology. Assuming that everything goes smoothly, it would be expected that the follow-up orders would be substantially larger. Furthermore, it was stated that Uni-Pixel currently has 20+ engagements with other companies that are all in different stages from testing, to prototypes, to negotiations. I would also assume that many of these 20+ engagements are waiting to see if any of the original POs are re-upped since they probably don't want to take on the extra risk of dealing with a new technology.

So how quickly can Uni-Pixel ramp up production? My expectation is that there may be one or two POs announced this quarter (Q4), with the majority waiting until 2014. I would expect that "Dell" will place a significantly larger PO in Q1 2014, which would then trigger a waterfall-type effect as other potential customers gain faith in Uni-Pixel. Each SKU represents the potential of 100k+ units per month for "high demand" items and 10-20k units per month for "low demand, high-end" products. Each customer can have multiple SKUs. In my previous articles I highlighted several reasons why it is not unreasonable to expect Uni-Pixel to be shipping 1 million, 2 million, 3 million, or even more units per month by the end of 2014. After all, there is a reason why both "Dell" and Intel requested that Uni-Pixel reach an initial capacity of 1.3 million units per month. Killion himself stated that the current Kodak facility has room for approximately 3 million units per month of production, yet Uni-Pixel is already in discussions with two different possible manufacturers in Asia in case they need to expand faster (one in China, one in Korea - rumored to be Samsung).

If we use 1.5 million units per month as a baseline production amount by Q4 2014, then we can expect Uni-Pixel to be at a run-rate of approximately 1.5*12*6 = $108 million in gross profit. Remove $20M for OpEx, 30% for taxes, and divide by the fully diluted share count of 15M, and you get $4 in EPS in 12 months. For what it is worth, the analyst average EPS for 2014 is currently around $2.50, but this includes the slower Q1 and Q2. If we assign a conservative forward P/E of 20x, this math suggests that the stock should currently be trading between $50-$80.

And remember, I was fairly conservative with pricing, yields, P/Es, etc. For those that believe there is no way this $14 company could be worth $80, just remember that this only amounts to approximately a $1B company, which is still very small.

I hope this article has served its purpose in clearing up much of the confusion surrounding this tiny company. If you have any further questions or a serious contention with something presented within, please send me a PM or leave a comment below and I'll do my best to expand and clarify on the point. Thank you.''

Complete Write-up here

http://seekingalpha.com/article/1826802-uni-pixel-claims-victory-with-3-purchase-orders?source=email_rt_article_readmore

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