On Thursday December 11th, Identiv (NASDAQ:INVE) revealed that it is indeed supplying NFC technology for Disney’s (NYSE:DIS) Infinity line of toys. We have mentioned this several times in the past, but the company’s CFO, Brian Nelson, admitted this fact on December 11. We have provided his audio presentation here in its entirety accompanied by the investor slide show.
Additionally, through our due diligence, we have learned that Identiv will likely play a major role with Disney’s Star Wars infinity toys. These are set to be released toward the end of next year in conjunction with the new film in the series, “Star Wars: Episode VII – The Force Awakens.” We feel the new Star Wars infinity toys will see blockbuster sales as the original Star Wars toys saw back in 1977, which should add a substantial amount of exposure for the company and revenue toward its top line growth next year and into 2016.
Also, in the conference Brian explains in part how Identiv handles Cisco’s (NASDAQ:CSCO) internal security for the company. We see this development as a potential branch out for Identiv as Cisco has been gearing up more towards “The Internet of Things ((IoT)),” and Identity as a service (IDaaS).
In September of this year, Identive won the Security Products 2014 New Product of the Year Award for Near Field Communication (NYSEMKT:NFC) Devices, so it’s obvious why Disney and others have been choosing Identiv for its NFC needs.
Opus Bank has recently doubled Identiv’s line of credit from $20M to $40M, and has moved the first payment on this loan from 2015 to 2017, which is highly significant as it provides additional leverage for the company moving forward. Over the years and under old management, the company has racked up nearly $400M in deficit, which is very attractive for the right suitor to acquire the company. This allows an acquiring company with the correct means to enjoy tax free profits up to $400M, which we estimate adds about $100M in acquisition premium for the company.
We predict that Identiv will be acquired next year for at least $400M, provided the overall market is stable and no unexpected events occur that would potentially crash the market.
With a current market cap coming in around $150M, we feel Identiv is up to 3x undervalued against comparable companies of its size and in its segment. According to many analysts, the IoT segment alone will reach a peak value of $7.1 trillion by the year 2020.
Identiv also has a strong deal in place with Verizon (NYSE:VZ), and has been growing by winning additional deals. According to the company’s CEO Jason Hart, these will be announced as soon as the deals “roll out.” Additionally, we have learned that Identiv plans to hire a reputable IR firm after the first of the year and commence a road show, so we expect the stock to continue its slow rise and reach near its fair value by the end of Q1 2015.
In our estimation, this is the only reason the company has remained undervalued and under the radar. The company has been relying on internal IR since late last year, when Hart and his team took over the company. This was done to cut costs and transition the company from near insolvency and a weak position to a company with a strong credit line, cash position and leverage.
We think Identiv provides a good opportunity for those who enjoy the risks associated with a small-cap company. With the revelation of Disney as one of its clients, legitimate IR, and its current growth rate, we think 2015 will be a break out year for the company.
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