You need a geological hand lens just to see them, but the words written on some chips inside an Oculus Rift are making analyst Nikhil Thadani more bullish about Spectra7 Microsystems (Spectra7 Microsystems Stock Quote, Chart, News: TSXV:SEV).
Yesterday, Mackie Research Capital found three Spectra7 chips in our in-house “tear down” of the consumer edition of the Oculus Rift consumer Virtual Reality headset. Following the report, shares of Spectra7 rose sharply, and Bloomberg credited the Mackie report for sparking the move.
Mackie decided to buy the headset and take it apart because popular “tear down” blogs had not yet torn down the Oculus Rift cable. The firm found “S7 VR 7050” chips (bi-directional low latency data) in the USB & headset connector and “Spectra 7 VR 7100” chip (high speed video) in the headset connector.
Thadani says Spectra7’s presence in the Oculus does not yet not confirm that the company is the sole source supplier of relevant components, but it removes any negative speculation.
“SEV’s presence in Oculus VR headset materially de-risks story,” says Thadani. “Industry providers expect VR headsets to stay tethered in the foreseeable future. SEV now has a verified first mover advantage on a very exciting computing platform. We believe full economic benefits of this advantage go beyond near term financials. SEV’s strong stock price reaction on our initial report only partially reflects this upside in our view.”
In a research update to clients today, Thadani upgraded Spectra7 Microsystems from “Speculative Buy” to “Buy” and raised his one-year target on the stock from $1.00 to $1.10, implying a return of 47 per cent at the time of publication.