TSE:PAT is not for the faint of heart, this analyst says

It’s time for Patriot One Technologies (Patriot One Technologies Stock Quote, Chart, News TSX:PAT) to pick up some contract wins and start growing its top line, according to research analyst Peter Hodson, who says the weapons detection company has shown a lot of promise but has yet to deliver.

Mississauga-based Patriot One has seen a lot of movement over the past year and a half, with the stock doubling in mid-2018 but now trailing off considerably in the last few months. PAT graduated to the senior TSX board earlier this year but the promotion hasn’t done the stock any favours, with it now sitting down two per cent year-to-date.

Part of the problem has been lack of follow-through up to this point, says Hodson, founder and head of research at 5i Research.

“Patriot One has a weapons detection technology and so it gets a lot of attention whenever there’s a tragic incident in the United States or elsewhere,” says Hadson, in conversation with BNN Bloomberg on Thursday.

“They’ve signed a couple of partnerships and even just a week ago they signed with Johnson Controls. The technology is pretty robust but they don’t have a lot of revenues yet. So there are a lot of investors who say, ‘Okay, I’d rather see real revenues to backstop the technology,’ because until you get some big contracts, it’s just maybe pilot testing or maybe investors don’t believe in the technology,” he said.

“Forecasted revenues are $7 million over the next 12 months, but the market cap is pretty big, a huge multiple of revenue, so the expectations are very, very high here,” he said.

Earlier this month, Patriot One announced the acquisition of artificial intelligence company XTRACT Technologies for $6 million and the issuance of 9,422,956 common shares. Management said the pickup is part of its ongoing attempt to enhance the power of its PATSCAN threat detection platform.

“Just over a month ago, we announced a development project with XTRACT, and during this period we’ve already seen great progress in significant opportunities for enhanced detection accuracy,” said Martin Cronin, Patriot One’s CEO and President, in a press release on September 9.

“With new sales opportunities arising every day for a covertly deployed, multi-sensor security solution, integrating XTRACT more deeply into our development and day-to-day operations made perfect sense. We are thrilled to have this highly talented group join our ranks; as they share our vision for creating a world safer from acts of mass violence,” said Cronin.

Patriot One has forecasted $7 million in revenue over the next 12 months and has secured some partnerships more recently, including with Las Vegas Mini-City project called Bleuteh Park.

Still, with a market cap of $225 million, PAT has high expectations placed on it, making it a high-risk scenario, says Hodson.

“You get a situation that if the market goes into a risk-off market, you’ve got a highly-valued tech company with not a lot of revenue, which is perhaps what you don’t want to own in a risk-off type of market,” Hodson says.

“But it’s one to watch, for sure, because we do like the partnerships that they’ve done so far. It’s obviously but unfortunately a highly needed solution, and if they can get some traction on contracts then investors will start paying more attention to them,” he says.

“But again, it’s not a stock for the faint of heart. You have to put your risk hat on because it could take longer, it may not happen, but so far so good,” he says.