Categories Analysis, Technology

LightPath Technologies stock dips to 4-year low

LightPath Technologies (NASDAQ: LPTH) stock fell to a 4-year low of $0.94 on Monday as investors remained concerned about the company’s future after the retirement of Jim Gaynor as executive chief next year. However, the company could turn beneficial by the development of technologies such as 5G, autonomous vehicles, and the Internet of Things (IoT).

The company manufactures and distributes optical components and assemblies used in Light Detection and Ranging (LIDAR) for autonomous vehicles, 5G technology, and IoT applications. It is expected that in the near-term, the stock could position itself for growth driven by a 38% increase in backlog. Also, the stock could inch higher on LightPath’s attractive valuation and strong growth.

LightPath essentially has two primary sides of the business: precision molded lenses or PMO products, and infrared or IR business. The PMO products, which is the company’s legacy business, is growing slowly and remained smaller than the infrared business. The PMO addressable market is expected at about $300 million and grows at about 3% to 5% annually, while the infrared addressable market is likely at greater than $500 million and grows at about 7% to 10% yearly.

Photo Courtesy: LightPath Technologies / Facebook post

Last week, LightPath said that Jim Gaynor plans to retire as President and Chief Executive Officer in June 2020 after more than 12 years with the company. The board has begun its succession planning process. In addition, the board has been working on evaluating several restructuring initiatives including organizational changes and sales process changes.

The board is implementing the initiatives for making LightPath more competitive, increase profit margins, grow EPS and increase return on equity to improve shareholder returns. The company intends the restructuring initiatives to be part of its 2020 sales and financial plans.

During early May, the company reported financial results for its fiscal 2019 third quarter ended March 31, 2019. The bottom line slipped to a loss from a profit last year as broader economic conservatism as well as changing product mix dragged revenues down by 7% amid a competitive pricing environment for legacy products.

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As of March 31, 2019, LightPath’s 12-month backlog remained strong at $17.1 million, an increase of 34% as compared to $12.8 million as of June 30, 2018. The increase was largely due to the renewal of a large annual contract during the second quarter, which LightPath began shipping against during the third quarter of fiscal 2019.

During the third quarter, the company expected orders from customers based on previous purchase patterns, which did not occur. Management believes these customers simply pushed back the timing of these orders. Thus, LightPath’s shipments exceeded bookings, resulting in a 6% decrease in backlog as compared to the prior quarter end. However, backlog remained at a significantly higher level at the end of Q3 2019.

LightPath neared the completion of the relocation of its New York facility to Orlando, Florida, and Riga, Latvia facilities. This relocation is on track for completion by the end of June 2019. The company expects to see a significant reduction in operating costs in subsequent quarters after the relocation completion. Upon closing the New York facility, LightPath expects to record a restructuring charge of about $700,000 in the fourth quarter of fiscal 2019.

Shares of LightPath Technologies opened lower on Monday and is trading in the red territory on the Nasdaq. The stock has fallen over 56% in the past year and over 44% in the past three months.

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