Pico-Cap Profitability Inflection: Strong Q2 Results Reinforce the Bull Case
Q2 confirms the profitability thesis, but significant inventory build signals management's major bet on a record quarter
Disclaimer: I own shares of the company discussed in this article and stand to benefit if they rise in price. I may decide to purchase or sell shares at any time without prior notice. Do your own research and size positions appropriately if you invest. Nothing here is meant to be understood as investment or financial advice. AI tools assist my research and writing process, enhancing analytical efficiency and clarity.
TL;DR
The recent quarter confirms the profitability inflection thesis outlined previously. Revenue grew 30% YoY, gross margins expanded, and the company posted another profitable quarter. I notice a massive inventory build-up, which management has confirmed to me is in anticipation of a seasonally strong quarter. This removes alternative explanations like supply chain worries and transforms the inventory from a simple data point into a direct signal of management's confidence. While risks remain, the results strengthen the bull case.
Introduction
Just when I published my initiation article, the company issued a press release confirming a positive trajectory for the second quarter. I covered the press release in a postscriptum to the article, intending to wait for the filing of the 10-Q to then provide a short update… the filing of the formal quarterly report of this OTC traded pico cap took until August. In this brief post, I discuss the post scriptum, the confirmation of the positive trajectory, a very bullish inventory movement ahead of what is typically the strongest quarter of the year, and explore the long-term potential in the appendix.
For your reference, the initial article was
In case you fear you missed an entry into this illiquid stock, fear not, the share price moved up and down, but is largely unchanged currently.
