Energous Plunges on Analyst Speculation

Shares of Energous (NASDAQ: WATT) plunged on Friday after JP Morgan analyst Harlan Sur warned that future iPhones equipped with wireless charging probably won’t use the company’s WattUp technology. That hardware allows devices to charge wirelessly while as far as 15 feet away from the base, and there’s been widespread speculation that it would make its way into future iPhones.

The key facts

Energous hasn’t launched any commercial products yet, so it doesn’t have a stable source of revenues. Its only reported income comes from “engineering revenue” from potential customers and partners, which came in at just $1 million last quarter.

Energous believes that its partners will start selling consumer products equipped with its technology later this year. Energous has neither confirmed nor denied the iPhone rumors, which helped lift its shares by 140% and inflated its market cap to nearly $300 million over the past 12 months.

However, Sur warns that the recent issues with Samsung‘s batteries will likely cause major smartphone makers to think twice before using wireless charging tech from an untested player like Energous. Sur believes that Apple is actually developing a new wireless charging chip for future iPhones with Broadcom (NASDAQ: AVGO) — which would make Energous’ offering unnecessary for the tech giant, and boost Broadcom’s annual revenues by $500 million to $600 million.

Should investors be worried?

Sur’s report is based on speculation, but confirmation that its products were not slated for use in the iPhone could certainly sink Energous’ stock. And given its lack of meaningful revenues, the plunge could be fast and steep.

But it wouldn’t mean that all of Energous’ plans would be iced. Many companies, including Dialog Semiconductor, have already signed major partnerships with the company, so we’ll still likely see a few Energous-powered devices hit the shelves later this year. However, investors should note that Energous remains a risky, volatile stock which trades on a lot of speculation — so conservative investors should stay far away.

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Leo Sun has no position in any stocks mentioned.

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