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Neonode Inc

Research note


Neonode: Autoliv's zForce DRIVE deals derisks the case further

At CES 2017 Autoliv demonstrated the Neonode-based zForce DRIVE steering wheel. Autoliv stated that it has already closed zForce DRIVE deals with two car manufacturers and are negotiating with even more.

Click on this link to see the Autoliv demonstration from CES 2017.

Neonode has not commented on the Autoliv deals but we expect the company to do so when appropriate, i.e. when the deals are fully closed all the way down to the Neonode/Autoliv level with regards to whatever their contract looks like. 

As for the potential of the Autoliv deal it should be noted that the last module deal of October is worth USD +11 million on volumes of 700 000. However, these were vehicle entry system modules. Given that we expect the steering wheel modules to have twice as high ASP the two zForce DRIVE deal's sales could thus be worth over USD 40 million or about half the current market cap, using similar volumes assumptions as the October deal.

The two Autoliv deals are already in our estimates as we previously have included a hefty part of steering wheel module revenue for Neonode in 2018. However, Autoliv's traction at CES 2017 derisks our Neonode investment case. The share is currently trading at USD 1.6, which from our point of view implies a solid risk/return. Our reasonably pessimistic scenario indicates a fair value of USD 1.2 whereas our most likely base scenario is at USD 3.7. In the light of the Autoliv news above it could be argued that the risk is now lower than when the share was around USD 1.0 in the early fall of 2016.



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