Spacetalk Adventurer wins international red dot design award
Looks like a great recognition for the company's latest watch, in one of the world's largest global design competitions. I hope this award assists the company with new getting into new distribution channels internationally.
You can see the announcement, here.
having bought this product for 2 kids, I can tell you- its crap. the network is old and slow, its an expensive product for what it is, and its not "cool" in school. I have 2 watches that are in a drawer and unused as a result
Spacetalk is front and centre in the very early stages of kids connected devices (KCDs), a new product category that they have created. KCD's solve the problems of keeping kids connected to their parents and restricting use of the free internet and social media. They have access to powerful network effects in schools and amongst parenting communities and through their sticky subscription based communication app, Spacetalk.
With only 7 strawman members holding the investment, the investment idea is undiscovered and trades on less than a 2 x revenue multiple. It is growing rapidly with active devices up a staggering 202% YoY in the half year update. There is ample room for both business growth and multiple expansion, only when I seee both engines are available I will make a new investment.
Spacetalk have made the right foundations in ANZ, have proven their products are popular and high quality and have an impressive strategic direction. Whilst it remains to be seen how popular KCD’s and their Senior device will be, they solve relevant problems and I am particularly bullish that KCD’s can become widely adopted globally, presenting an extraordinary opportunity for Spacetalk and the patient investor.
My investment research paper is saved below, inclusive of a valuation. If you are interested, please reach out with any questions or open up a forum if you would like to discuss the opportunity further. As always, I encourage interested investors to challenge my thinking and contribute as much as possible. With this product, you can read many reviews online or go into JB Hi Fi/Vodafone and chat to them about the products, this was an important part of the DD for me.
Spacetalk devices to sell through Telstra
Announced today, that they are all good to go with the Telstra deal and Spacetalk devices will be in Telstra stores available for purchase next month. This is a big deal and will capture attention of Mobile Network Operators (MNO's) globablly and add to a strong existing distribution network.
I've been working hard on my investment thesis and valuation, I hope to have it up here for you guys by the end of the week :)
My fears have been answered.
This is exactly the same features as Spacetalk at a much cheaper price to parents. Sales are going to take a massive hit this Christmas. Will reduce my stake and sell all if the December quarterly is disappointing. Apple can outcompete everyone with pricing and volume in consumer electronics (especially smartwatches).
Unfairly sold off or fairly sold off? That's the question.
Last year, I got my forecast completely wrong.
"Rough modelling forecast show that if they grow sales at 130% to 2025 without facing large competitors with a better offering, they could snap up 33% market share. The forecasted market is $6B in 2025." - last year me :D
At the time I felt very optimistic in my assumption. Now, I believe it is utterly wrong. Currently, it is reported as of 1HFY20 that 25,000 SPACETALKs have been sold. Management gave guidance for FY20 at 90,000 sales. Hence, despite "exponential growth" as stated by Mark (CEO & Chairman) they had to make up 75,000 in 2HFY20. It felt exponential as MGM Wireless sold more SPACETALKs in 1HFY20 than the entire FY19.
Unfortunately, Covid-19 hit and it derailed their sales growth. Wearables revenue went down from $6.2M in 1HFY20 to $0.62M in Q3FY20. You must be wondering why I make comments on last quarter sales. The sales drop was significant, Q3FY20 was meant to be the big quarter to drive sales especially during "back to school". The sharp drop in revenues correlate to significant loss in sales. By my estimates, they might have sold only 4,000 SPACETALKs (UK & Aus) in Q3FY20.
Putting my pessimistic hat gives another 4,000 SPACETALKs sold in Q4FY20. This number is probably wrong as lockdown restrictions eased off during May. Hence, my assumptions give 33,000 SPACTALKs sold in FY20. This is 57,000 fewer than the 90K guidance. Fortunately, during the pandemic management removed their guidance. With lower growth in 2HFY20, gives total FY20 revenues of ~ $11M. Most of the growth came in 1HFY20 with 25,000 SPACETALK sales.
Regarding the long-term forecast. A 33% market share means capturing $2B, given the average price per SPACETALK is ~ $250 would recquire MGM Wireless to sell 8 million SPACETALK devices. I honestly, do not think they can get there. Management gave guidance on the population targets. Since, the device is for kids between 5-12, their target market size is ~240K children in Aus and ~1.7 million children in UK. Thus a total market size of 2 million children. Thus, to get 8 million MGM has to penetrate a large market like USA & China. I put the 8 million target in the very highly unlikely bucket.
So, what is a reasonable estimate I am willing to make, I think 350k SPACETALK sales in 2030 is reasonable. The market share is 1.5% which is tiny but achievable. The forecast does not include assumptions on (US, China and SPACETALK Life).
So, the final question to consider would be, "did the stock deserve to be sold off?" I believe so, however the market is currently being too negative on future growth. I think there is some light in the end of this dark tunnel. 350k SPACETALK sales in 10 years, give around $90M in revenue. The market cap is $20M. This looks like a bargain.
25 May 2020. MWR enters trading halt today ahead of a significant new customer contract and capital raising. Suspect leaky ship with the stock rallying from $0.091 on 18 May 2020 to close at $0.14 on 22 May 2020, the last day of trading up over 50% in 3 days, though there was a pretty strong market rally in smallcaps.