WIMI Hologram Cloud,Inc. (WIMI)Stock: Do Analysts Think You Should Buy?

1. WIMI Hologram Cloud (Nasdaq: WIMI)

Augmented and Virtual Reality

WIMI Hologram Cloud, Inc. (Nasdaq: WIMI) referred to as WIMI in the report represents a rapidly growing company with a unique technology-intensive business model with an objective is to be a first-in-class market leader in the holographic AR technology, an emerging industry that has the growth potential to make a big impact on the local and global economy going forward.  The superior holographic AR technology and its continuous innovation is what distinguishes the company from its competitor and is the reason why the company is progressing towards higher revenue growth and an increase in overall margins.

As a nascent market, the global holographic AR market has tremendous growth potential and has attracted large investments contributing to the industry growth since 2016. Despite the stiffer competition, we believe the company will remain competitive, based on strong execution, excellent quality of their applications, effective sales, and marketing strategy, top-notch quality of customer service, and inherent capabilities to acquire complementary technologies, products, and businesses to enhance the features and functionality of its applications.

2. About WIMI

  • Leadership Ranking: WIMI ranked first in terms of several clients, holographic AR contents, as well as the number of holographic AR patents and software copyrights, in the Chinese holographic AR industry.
  • Strong First Half Results in 2021:   +202% Revenue Growth, +190% Net Income Growth in 1stHalf ended June, Gross Margin 29.6%, Net Income US$ 5.0 million
  • Unique Technology – Software and Hardware-Based – Holographic AR and Semiconductors
  • Metaverse Play – The company is gearing up to grab this huge market opportunity.
  • The stock is still relatively undiscovered and undervalued, in our opinion, with Evaluate Research the only firm whose research reports/estimates on WIMI are now available free to all investors.

We initiate coverage with a buy rating on the stock and believe that it should trade at a higher price to sales multiple compared to the current 2021 annualized P/S multiple of 1.5x given the expected rapid growth in revenues. Our short-term 12-month price target on the stock is US$ 7.00 per share, which represents an upside of about 160% over the current stock price. The price target implies a 3.79x multiple on the company’s annualized revenue of US$ 160 million which is still at a discount to the NASDAQ 100 index with a multiple of 5x.

3. The Price Target

Price Target US $7.00 per share, P/S ValuationRelatively Cheap. A rapidly growing company like WIMI valued based on expected growth due to the technologically intensive aspect of the business, should ideally trade at a relatively higher price to sales multiple to benchmark indices like the NASDAQ and the S&P 500. This phenomenon is quite common in technology-related sectors. But even if we take a conservative approach and expect it to trade with similar kinds of valuations, it appears to be at a significant discount to the price to sales ratio of these technology benchmark indices.

We initiate coverage with a buy rating on the stock and believe that it should trade at a higher price to sales multiple compared to the current 2021 annualized P/S multiple of 1.5x given the expected rapid growth in revenues. Our short-term 12-month price target on the stock is US$ 7.00 per share, which represents an upside of about 160% over the current stock price. The price target implies a 3.79x multiple on the company’s annualized revenue of US$ 160 million which is still at a discount to the NASDAQ 100 index with a multiple of 5x.

We anticipate earnings to explode as indicated by the financial performance of the company in the first half of 2021. Along with the expected revenue growth, the margin profile also looks extremely solid with more scope to even expand further once the operations of the company start to achieve economies of scale.

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