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Neonode Inc

Research note


Neonode: Signs USD 11+ million contract within automotive

Today, Friday, it was announced that Neonode has signed a contract worth over USD 11 million with a US automotive OEM, implying over 700 000 modules in total according to our ASP calculations. The contract is related to sensor modules for vehicle entry systems. Converting to modules is a core part of our investment case as we expect modules to contribute with over twice as high gross profit compared to licenses. This is the second automotive deal within modules, following the tailgate sensors contract during Q2, and we expect many more to come.

We were not assuming entry system modules as early as 2017 but expect some other coming modules in 2017, meaning today's event in itself will not necessarily make us raise our estimates following the Q3 report on November 9. However, the upside risk in our automotive estimates is probably now higher than the downside risk and in addition today's news verifies our investment case and or base case valuation of USD 3.7, which means about 200 percent upside at the moment, compared to 270 percent yesterday. We therefore feel that the share price's upward correction of today of 20 percent is a justified movement. The share is now trading on levels around our pessimistic bear case scenario of USD 1.2.

We expect Neonode to return in the Q3 report with more information on the application area and whether this is a single or multiple models deal. We also hope it can give us some sense on how the USD 11+ million will be distributed over the years.

As mentioned in the announcement, this is the same tech as the AirBar (see yesterday's Redeye comment on increased AirBar capacity). To find more information about AirBar and Neonode's other growth prospects, read our initial research report. We reiterate our base case of USD 3.7 and our fair value range of USD 1.2 - 6.2.


Download our latest Research Report from 2017-08-15

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