At time of writing, the share price of MGM Wireless Limited [ASX:MWR] is down 5.37%, trading at $3.70 per share.
It has been a meteoric rise for the stock this year, with it delivering a 470% one-year return:
Yesterday, the company released a trading and sales update for the Christmas period, which investors are currently digesting.
Good news and bad news for MGM Wireless’ share price
The good news for the company includes a couple highlights from their most recent announcement.
For instance, sales for six months to 31 December 2018 totalled 10,989 units. That represents a more than tenfold increase versus the same time last year.
These sales resulted in 1H FY2019 revenues exceeding $4 million, an increase of 154% compared to last year.
In addition to the sales, recurring App revenue exceeded $30,000 per month in December with 6,200 active subscribers.
Now for the bad news (sort of).
They sold out! Namely, MGM Wireless’ sales were actually limited by their stock levels.
MGM Wireless admitted this in the announcement saying:
‘Determining demand and establishing stocking requirements at store level was a significant challenge for the Company and its distributors. On November 5, 2018, the Company announced that over 5,000 units had been shipped to bricks and mortar retailers as initial stock. Subsequently, the Company supplied about 4,000 units to replenish store stock levels. Even so, many stores sold out before Christmas but too late to raise their internal purchase orders that would have triggered further re-supply.’
They have, however, already received orders for 2,300 units so far in January as retailers restock ahead of the back to school sales period.
Below you can see a picture of what their SPACETALK product looks like in the hands of their CEO:
Source: Australian Financial Review
What’s next for the MGM Wireless share price?
Money Morning thinks MGM Wireless’ product is genuinely exciting, even cool.
Those of us that grew up before the advent of smartphones are all aware of the potentially destructive effect that they can have on children, and MGM Wireless’ product addresses this concern.
In a world where we get bombarded with stimulus and information from every angle, a product that limits these things is an interesting proposition. Indeed, MGM Wireless’ product distinguishes itself from other smartwatches by what it doesn’t do.
The regulatory environment around schools and smartphones could well be a boon for MGM Wireless as well.
The company’s focus on education is important, and with the recent ban of mobile phones in NSW primary schools, it may reap some rewards from a shift in how we educate children.
In other news for the company, they are preparing to enter the UK and European market with the goal of launching this financial year.
In France, the Education Ministry instituted a ban on mobile phones for years one to nine just this past September.
Other European companies may follow suit, something which could be of benefit to MGM Wireless if it gets its European launch right.
Going forward, they will likely need to address stock issues if they are to keep up with demand.
For Money Morning