Microcap Nxt-ID Has Crashed, But Is There Beauty In The Rubble?

• NXT-ID, Inc. NXTD has seen a 55.84 percent decline in its share price, year to date.
• Benchmark’s Daniel L. Kurnos has maintained a Speculative Buy rating and price target of $6 on the company,
• Although progress on achieving scale has been slower than expected, the company’s order volume continues to see sequential improvement and a meaningful uptick is expected in 4Q15.

Despite “initial signs of traction,” the stock continues to see selling pressure. However, while order volumes are expected to rise in 4Q15, manufacturing issues are expected to decline. “Technical reviews remain positive, with competitor offerings stalled or facing either developmental or implementation headwinds,” Kurnos stated.

Kurnos believes that there is “significant disconnect” between the potential opportunity for the company and its current share price.

According to the Benchmark report, “Although Nxt-ID is pacing behind our original expectations in terms of product rollout, we still expect the company will sell ~30,000 units by year-end, with upside depending on any third-party (3P) distribution deals.”

Kurnos expects unit sales to improve from 900 in 2Q to 2,500 in 3Q, and then ramp meaningfully into the holiday season with 25,000 in unit sales expected in 4Q15, leading to revenue of $4.5 million.

In addition, the company has been developing “enhancements and additional offerings for its product portfolio.” Kurnos expects Nxt-ID’s first smart card, expected by the year end, to offer a fully functional EMV solution. This could provide further differentiation for the product and improve its relevance.

Apart from this, the company is also expected to launch a digital, phone-based app in 2H16, which could “tap into the more traditional mobile payment market.”

Kurnos also believes that “given the prevalence of large players entering or attempting to enter the payments space, we think a licensing deal could be possible, especially if Nxt-ID establishes proof of concept this holiday period.”