Beam Global: Why A Short Squeeze May Be Coming Soon
Beam Global: Why A Short Squeeze May Be Coming Soon
Feb. 07, 2023 12:03 AM ETBeam Global (BEEM)
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Since Beam Global (NASDAQ:BEEM) plunged from approximately $76.00 per share on December 28, 2020, it has continued on its downward trajectory until it landed at about $10.00 per share on January 24, 2022, and has since been trading in a range from $13.00 to $20.00 per share, with an occasional short-term move on either side of that range.
From the time of its last earnings call it has reported a string of new orders valued in the millions, adding to an already fairly robust backlog.
Even with the announced new orders the share price of the company has failed to break out, which appears to be one of the big reasons short interest stands at a hefty 20.14 percent.
Once the company consistently delivers on its growing backlog, revenue is going to climb much higher, and if it's able to widen margins and show a clear path to profitability, I see the stock having a strong chance to become a short squeeze play that will drive its share price up.
In this article we'll at some of its recent earnings numbers, some of its wins, and how to think about the stock if it looks like it's going to start to squeeze the shorts out.
Over the last quarter and year, BEEM has been showing signs of solid revenue growth, with sales in the third quarter of 2022 coming in at $6.6 million, compared to revenue of $2.00 million in the third quarter of 2021. For the first nine months of 2022 revenue was $14.1 million, compared to revenue of $5.5 million in the first nine months of 2021.
One of the more important things to take into consideration in regard to revenue is, it had been growing at a nice pace in the time periods shown above, but that was before the big orders started rolling in. For that reason, the fourth quarter of 2022 and first half of 2023 should be strong on the revenue side of its business, assuming its customers pay in a timely manner.
Concerning the backlog of its EV ARC systems, it contracted more backlog in the third quarter of 2022 than it has since the start of the company about 10 years ago.
It has added backlog in its battery division as well. The total value of battery backlog is valued at $62.2 million, with the bulk of that expected to be deployed before the end of 2023.
A little later in the article we'll get into more on orders since the earnings report.
As for cost of revenues, that has jumped along with revenue growth, reaching $7.00 million in the third quarter of 2022, compared to $2.23 million in the third quarter of 2021. Cost of revenues in the first nine months of 2022 was $15.1 million, compared to cost of revenues of $6.1 million in the first nine months of 2021.
Net loss in the reporting period was -$(6.8) million, or -$(0.67) per diluted share, compared to a net loss of -$(1.69) million, or -$(0.19) per diluted share in the third quarter of 2021. In the first nine months of 2022 BEEM had a net loss of -$(11.9) million, or -$(1.21) per diluted share, compared to a net loss of -$(4.6) million, or -$(0.52) per diluted share in the first nine months of 2021.
Earnings per share in the third quarter was -$(0.67), missing by $0.43.
At the end of the third quarter of 2022 the company held cash and cash equivalents of $4.68 million, compared to $22.00 million at the end of calendar 2021.
Management input on its balance sheet
CEO Desmond Wheatley went to great length in the last earnings report to comment on the company's balance sheet, so we'll get into a few of the things he said that he believed would provide a better understanding of where the company stands in that regard.
First, concerning cash on hand, he offered up his reasoning as to why the company wasn't burning through cash at an alarming rate during 2022.
With that in mind, he pointed out that with the enormous opportunities management saw for growth, it made the decision to leverage the balance sheet in order to acquire inventory for the purpose of mitigating supply constraints that would inevitably continue on; that was specifically true in relationship to items the company felt would be at risk within the supply chain.
A major item acquired was battery cells, which have been in high demand. Related to that BEEM also prepaid the vendors in order to ensure that throughout 2023 it would have enough inventory on hand to meet demand.
It also spent on its "WIP, or work-in-progress EV ARC systems," because of expectations it would receive the final signatures on a number of the larger orders it had recently received. Another issue brought up was concerning working capital, which was reportedly being skewed because of the superior performance of a battery company located in Chicago that it had recently acquired. Per the terms of the provisions of the purchase agreement, BEEM has had to revalue the company, which has resulted in an approximate $5.00 million hit on its P&L statement, even though there isn't a cash impact from the payout.
After the adjustment to its working capital, it was reported as $12 million from a GAAP perspective, but $17 million from non-GAAP reporting guidelines, as reflected in cash and inventory.
The point being made here is the balance sheet is stronger than it appears, and the company isn't simply burning through cash with no benefit from the inventory moves it has made.
Wheatley also noted that it should be able to convert the bulk of the $12 million in inventory it's carrying over the next 180 days (from the time of the earnings call) to cash. He considers it money in the bank because the company won't run out of cash during that time; at least he doesn't believe it will.
Taking all this into account, the company actually spent a little over $2.00 million per quarter during 2022, according to Wheatley, and at that rate it has enough capital to run the company for the next two years without having to raise capital if it chose to go that route.
All of this is easy enough to understand, but the company is still operating on a fine edge, and its customers will have to deliver on payments in a timely manner for things to work out for the company in a positive way in the near term.
New business won
The company has had a plethora of new wins since the last earnings report in November of 2022, and if those start to generate enough revenue in the near term to have a big impact on the company's performance, I see this as being the catalyst behind a potential short squeeze that would drive the share price of the company much higher in a relatively short period of time.
I don't believe the company, assuming that's how it plays out, will be able to maintain its share price at a much higher level, but I do believe both the floor and ceiling will be significantly higher than they have been over the last year or so.
Since its last earnings call it has won a $2.9 million order from the U.S. Department of Homeland Security; a $5.3 million order from New York City; a $29.4 million order from TechFlow; an $11.7 million order from the U.S. Department of Veterans Affairs; among a several other orders where the numbers weren't revealed, presumably because they were smaller in nature.
When added to its existing backload at the time, this has positioned the company for some serious growth in the quarters ahead, and that doesn't include any new orders the company is certain to receive.
The only real question here is the timing of the payments from quarter to quarter. If they pick up steam in the second half, it will mean we won't see the full growth potential of the company until the revenue starts filtering in.
BEEM has the potential to really surprise a lot of investors to the upside, but with a modest balance sheet and lack of certainty as to the timing of the payments of its largest customers, it could take another quarter of two before the market starts to see it may be becoming a growth stock.
Once revenue starts flowing in from its recent wins it's going to enjoy a prolonged period of revenue growth. The key thing to watch is how the impact of increased revenue will have on the bottom line of the company. If it shows revenue growth and margin improvement on a sustainable basis, the company isn't going to be held back for long.
As for the strong short interest, I would be careful with BEEM when considering the potential it has to report a blowout quarter in the reporting periods ahead. I wouldn't want to get caught on the wrong side of the play at that time because of the probability it'll really take off for a period of time before it starts to level off.
Under normal conditions I would give a "Buy" rating to BEEM, but the uncertainty in regard to the timing of payments for its largest customers and its modest balance sheet point to the possibility it may not be able to cash in on the big opportunities before it in the short term. For that reason, I have a "Hold" on the company until there's more visibility in those areas.
Further out, if the company will maintain spending discipline and
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