TPS Position Update – February 24, 2016

| February 24, 2016

TPS Position Update

. . . . Ocean Power Technologies Inc. (NASD: OPTT) – Sell 

Let’s take our profits off the table now.

OPTT is the poster child for a company that has a great idea…

…that doesn’t turn out to be well executed.  And things are not going as well as they once were at OPTT.

This New Jersey-based tech company is in the business of converting ocean wave energy into electricity.  To do this, it uses what it calls PowerBuoy technology. 

The sole bright spot… last month, the firm received $1.7 million from a State of New Jersey Business Tax Certificate Transfer Program.  The money goes toward financing growth and operations.

But the firm is struggling.  It desperately needs more business.

We don’t see this happening, and we are recommending a sell order for the stock. 

For the six months ended October 31, 2015, revenues were $600,000, down from $3.3 million for the corresponding six months of 2014. 

The problem… fewer billable hours from three important clients.

Ocean Power Technologies has run into problems with these clients, which include the federal government’s Department of Energy and Mitsui Engineering & Shipbuilding.

We’re also disturbed with the health of the balance sheet.

At the end of October 2015, total cash, cash equivalents, and marketable securities were $10.4 million, down from $17.4 million at the end of April 2015.

That’s a burn rate we aren’t comfortable with, and another factor in our decision to sell.

We recommended Ocean Power Technologies in March 2015 at $0.47 and now it’s at $1.43.

This is the time to pocket your profits and move on to more promising opportunities. 

. . . . U.S. Geothermal Inc.  (NYSE: HTM) – Hold   

When the firm recently released financial guidance for 2016, we were pleased to see these ambitious numbers…

  • Operating Revenues:         $29-34 million
  • Net Income :         $3-7 million

We recommended the stock in April 2015 at $0.78. Now it’s at $0.55.

U.S. Geothermal is in the renewable energy business.

It operates projects in Neal Hot Springs, Oregon, San Emidio, Nevada, and Raft River, Idaho. 

There’s a project under development in California, a second phase project at San Emidio, Nevada and new projects in Crescent Valley, Nevada, and El Ceibillo, Guatemala.

What’s ahead?  Something’s up… the firm has retained Marathon Capital to “investigate strategic alternatives”.

The stock price has been in a holding pattern.  When the markets were hit in January, U.S. Geothermal came through in good shape.  It started the month at $0.62 and finished at $0.61. 

Action To Take

  • Sell Ocean Power Technologies Inc. (NASD: OPTT)
  • Hold U.S. Geothermal Inc. (NYSE: HTM)

Category: TPS Update

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