Thanks for the news. As others have said, I agree that announcement of Production Certification is very newsworthy. There are many investors out there that would buy into Valence's story if they KNEW that production was on schdule. What's newsworthy to Valence management and to investors are sometimes different. Back in 1993, 1994, Valence management was liberal in their announcements. But, in light of their disappointment of production, and lawsuits, etc, I think they've opted to go to the other extreme and not announce anything until it's 100%. Well, 100% in the market is unusual.
They probably feel that the story will be told when they start making batteries and doing the deals with the OEMs.
Regarding the Blue Sky predictions. Yes, at this time, any types of predictions are blue sky given that there have been no official announcements by management regarding production and OEMs. HOWEVER, your analysis makes complete sense IF Valence can mass produce these batteries. Given the cushion that you've allowed for and other unknowns, and placing only a 12 multiple on this stock, the 60 prediction IS attainable. Yes, there are A LOT of IFs involved in determining the potential of Valence. But, there are no IFs in reviewing the huge demand for this market. In this case, if you make a better mousetrap, the world will come knocking at your door.
The race is on. What is a fair value of Valence? Well, if they can't make the battery, probably 2 or 3, if that. If they can, which they've continued to assert that they're on schedule for 1st half of 1997 to begin production, then who knows? $7, $9, $12, $18, $26, $32, $39, $45, $50, $60??????? If they achieve their goals, then all of these could be low. But, right now, it's all an IF. The only IF I'm worried about right now is, IF I had more money, I'd buy more at $9.
Looking forward to 12 this week. (We have to take one step at a time. As much as I'd love to see this stock at 60, the reality is $12 right now. If we take out 12 like we took out 7, we may be seeing 16 - 18 rather quickly.)
FACTS: Revenue, nothing substantial as of 12/31/96. All grants provided by Delphi and other JVs taken against R&D. Loss, increasing due to R&D costs, even with offsets by grants. Sufficient cash (and equivalents) on hand at 12/31 of $80 million. No significant debt, just line of credit. Shares outstanding, 21,000,000. At $9 per share, it values this company at $190,000,000. Estimates of the potential market value by the year 2000 of advanced recharegable lithium polymer batteries have been as high as $3 BILLION, although other more conservative estimates place it at $1 BILLION. IF Valence can get 30% of this market, which is conservative if they're first to market, the using the lower estimate of $1Billion, they could easily obtain $300,000,000 of revenues. Using the higher estimate of $3B, and still 30%, they could obtain $1Billion of revenues by 2000.
Looking at 50 or 60/share from a total market potential perspective. |
