NEW YORK, Nov. 22, 2021 /PRNewswire/ -- Argus Research, an independent investment research firm, has launched Equity Research Report coverage on Focus Universal Inc. (NasdaqCM: FCUV)
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COMPANY HIGHLIGHTS: Excerpts (as conveyed by Argus Analyst Steve Silver) include:
- Focus Universal: Connecting the Internet of Things
- Focus Universal's technologies were created to simplify the design and production process for the Internet of Things (IoT) industry, the network created by billions of internet-compatible devices.
- The growth of IoT has been limited by interoperability challenges among devices with different technical specifications and functional capabilities.
- The company's Universal Smart Instrumentation Platform addresses these interoperability challenges and facilitates the sharing of up to 90% of common software and hardware among devices. It also helps product developers to lower costs, shorten design and development cycles, and reduce natural resource consumption.
- The company is currently selling niche products to customers in the horticulture industry through Hydrofarm, the largest U.S. horticultural distributor, with a roughly 50% market share. It is also preparing to enter the smart home market.
- Focus Universal recently raised more than $11 million through an equity offering and uplisted its stock on the Nasdaq. We expect this listing to boost investor interest in the company and facilitate access to additional outside capital.
- Based on our valuation analysis, we arrive at a fair value estimate for FCUV of $15 per share, well above current levels near $8.
INVESTMENT THESIS excerpts (Click Here to view full Argus Equity Research Report):
Founded in 2012, Los Angeles-based Focus Universal has developed proprietary technologies designed to simplify the design and production process of the Internet of Things (IoT). The company's focus on solving IoT "pain points" has resulted in three foundational patents and 13 provisional patents covering a broad range of technologies. Its key products are:
- Universal Smart Instrumentation Platform (USIP), which provides a common hardware and software foundation for the electronic design and production of IoT applications.
- Ultra Narrowband Power Line Communication, which enables the transmission of data among IoT devices over an existing power grid.
- User Interface Machine Auto Generation Platform (UIMAD), which provides a cross-platform middle layer between programing languages and designated application software.
- 5G++ (Ultra Narrowband Wireless Communication), which expands 5G coverage, reduces energy consumption, and provides substantial cost savings over existing 5G technologies.
- DoC (Device-on-a-Chip), which leverages the company's USIP technology in a single DoC chip able to carry out all device functions.
The company's technologies are designed to improve the functionality and efficiency of the Internet of Things (IoT), the network created by billions of internet-compatible devices. Gartner recently estimated that more than 20 billion IoT devices were in use globally at the end of 2020, and MarketsAndMarkets expects the overall IoT market to reach $561 billion by 2022. In our view, the market could double over the remainder of the decade.
The growth of IoT has been limited by interoperability challenges among devices with different technical specifications and functional capabilities. IoT functionality may also be slowed by interference from radio signals and radiation.
The company's Universal Smart Instrumentation Platform (USIP) is designed to address these interoperability challenges and to facilitate the sharing of data among devices. It helps product developers to lower costs, shorten design and development cycles, and reduce natural resource consumption. USIP integrates cloud technology, wired and wireless communications, software programming, instrumentation, artificial intelligence, and sensor networks into a single platform that makes circuit design faster and cheaper than it is when end users build network components from scratch.
USIP uses a computer or mobile device as a display and control, and communicates with sensors, instruments, probes, or controllers manufactured by different vendors without requiring the user to understand their unique characteristics. The portable version of the platform, accessible through a universal handheld device called a Ubiquitor, uses a smartphone to coordinate the control of different devices. In our view, the Ubiquitor is well positioned to become the industry standard as the efficiency of IoT networks improves. We expect Focus Universal to ramp up production of these devices next year, which should accelerate revenue growth.
The company is currently selling niche products to customers in the horticulture industry through Hydrofarm, the largest U.S. horticultural distributor, with a roughly 50% market share. We expect the company to leverage its relationship with Hydrofarm to penetrate the horticulture market further, which has annual sales of more than $10 billion. Using the company's Ubiquitor device, horticultural producers are able to monitor sensors and other instruments that regulate plant growing conditions, including temperature, humidity, light, pH, and CO2.
The company sees a second opportunity for the USIP in the global smart home market, which MarketsAndMarkets expects to grow from $78 billion in 2020 to $135 billion by 2025. Smart home automation enables the remote control of lighting, temperature, alarm systems, and household appliances. Current smart home products are typically able to control only a single dedicated function, while the USIP creates a control hub that can manage multiple functions at a lower overall cost.
In March 2019, Focus Universal acquired AVX, an IoT installation and management company that will provide IoT services to homeowners. Focus and AVX will launch this service next year. We expect the low cost of the products and service and AVX's experience with IoT installation to generate substantial consumer interest. Over the next several years, we also expect the company to expand into the medical/healthcare, commercial/industrial, and military verticals, among others.
Over the long term, we expect manufacturers to use the company's technology to reduce hardware and software development costs for IoT devices. In addition, we believe that Focus has opportunities to license its technology, which would provide a new revenue stream while also allowing the company to maintain control over its intellectual property.
Focus Universal has also developed a proprietary ultra-narrowband technology that increases the speed and improves the reliability of data transmission over existing power cables. These cables have historically transmitted data at slow speeds, provided limited coverage, and been susceptible to electrical noise and other types of interference. The company believes that it has developed a solution with superior noise rejection that provides a scalable, cost-effective solution for connecting devices. Its technology converts wall sockets into access points, thus providing greater reliability and security than wireless networks, which can be more easily accessed by unauthorized users or hampered by walls, floors, and other muting structures. We think that Focus Universal could launch this technology commercially in 2-3 years.
Focus Universal is also developing 5G++, an ultra-narrowband wireless technology that will help wireless providers overcome the current limitations of 5G. Despite its increased speed and reliability, 5G is limited by a narrow communication range, higher energy consumption than 4G, and infrastructure costs that are slowing its global rollout. Focus Universal's 5G++ technology is designed to expand coverage to an area 3- to 10-times larger than that provided by standard 5G, and thus to reduce the need for (and the cost of) new infrastructure. The company's ultra-narrowband technology will also impact energy consumption by up to 6,000x less than current 5G— an important issue as 5G base stations typically use at least twice as much power as 4G stations. This could provide significant cost savings for network operators and an attractive licensing opportunity for Focus Universal.
Similarly, in the software space, Focus Universal has developed a "user interface machine auto generation platform" (UIMAD). The platform simplifies software development for IoT devices by providing a common middle layer between programming languages and application software. The middle layer includes 90% of the necessary coding, allowing software engineers to program an application with relatively few lines of additional code. The technology is also able to convert thousands of lines of code into a micro-code saved to a sensor module. When these modules are plugged into a USIP, the saved user interface specification codes are sent to the platform and to a universal display, such as a computer or a smartphone.
The UIMAD platform resembles low-code or no-code programming in that it reduces the need for traditional hand coding and thus helps to accelerate application development. However, due to integration challenges, the absence of customization, and security risks, major software companies such as Microsoft, IBM, Oracle, SAP and Salesforce have not developed their own UIMAD platforms. As such, we believe that Focus Universal's UIMAD could attract licensing interest.
Addressing the limits of Moore's Law, Focus Universal has also developed "device-on-a-chip" technology (DoC) that combines integrated circuit components in a single integrated chip (IC). A DoC works as a single component but is capable of handling entire device functions. In contrast to integrated chips, which focus on hardware-hardware integration and limit integration to the component level, DoC includes both hardware and software, thus strengthening performance. DoC uses less power, increases reliability, and offers a smaller overall package with fewer required interconnections between components. As a result, we believe that DoC technology is better suited than traditional IC for IoT devices that are increasingly custom-designed and manufactured.
About Focus Universal Inc. (NasdaqCM: FCUV) www.focusuniversal.com
Focus Universal Inc. (NASDAQ:FCUV) is a provider of patented hardware and software design technologies for Internet of Things (IoT) and 5G. The company has developed four disruptive patented technologies to solve the major problems facing hardware design, hardware production, software design and network communication facing both industries today. These technologies combined have the potential to reduce costs, product development timelines and energy usage, while increasing range, speed, efficiency, and security for these industries.
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Dr. Desheng Wang
About Argus Research Corp.
Headquartered in NYC, Argus Research (www.argusresearch.com) is a leading independent equity research firm (est. 1934) ̶ providing fundamental and quantitative research coverage on more than 1,600 companies across all 11 sectors of the S&P 500, as well as macroeconomic and equity market forecasts, thematic research, model portfolios and pre-IPO research. In addition, Argus has recently committed to providing a sponsored research solution for small & mid-cap companies seeking coverage. Argus's Equity Research & earnings estimates are available on major research / earnings estimate aggregator platforms, including Bloomberg, Thomson Reuters, Factset and S&P Global.
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Argus Research Co. has received a flat fee from the company discussed in this report as part of a Sponsored Research agreement between Argus and the company. No part of Argus Research's compensation is directly or indirectly related to the content of this assessment or to other opinions expressed in this report. Please refer to the full Argus report and the disclaimer for complete disclosures.
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