One Stop Systems is a Buy, says Roth

Roth Capital Partners analyst Scott W. Searle delivered a client update on Tuesday on computing hardware and software company One Stop Systems (One Stop Systems Stock Quote, Charts, News, Analysts, Financials NASDAQ:OSS), saying the new CEO is good for One Stop’s business in aerospace and defence.

Escondido, California-based One Stop Systems designs and manufactures edge computing systems with autonomous and AI capabilities. The company announced on Monday the appointment of new President and CEO Michael Knowles, effective June 5, 2023. 

Knowles comes with over 30 years of experience in the global aerospace and defence markets, with positions at companies such as Lockheed Martin and Curtiss Wright Defense Solutions. At connectivity-focused Cubic Corporation, Knowles was President and GM of its Mission Performance Solutions business, a $700 million unit with 2,000 employees. His most recent post was Vice-President at Curtiss Wright.

“OSS is at a unique and promising inflection point with superior AI Transportable technology that has the ability to make a dramatic impact for warfighters globally, ensuring that it is ‘Never a Fair Fight,” Knowles said in a statement. 

“I’m excited to build on the inspiring AI product suite, driving growth in both defense and commercial markets and creating a powerful business model. OSS has the foundations for a team, products, and innovation mindset to succeed in the global marketplace and accelerate greater pipeline and business growth,” he said.

Commenting on the appointment, Searle said Knowles is well-suited to continue One Stop’s recent success and he noted that prior President and CEO Dave Raun will stay on as Board Member, a significant resource, according to Searle, as Raun had transformed the previously rudder-less One Stop into its current AI Transportables model, resulting in new product development as well as demand for its higher-margin offerings.

“Importantly, the architect of the current AI Transportables strategy, Dave Raun, will continue in his current Board role. Additionally, demand continues to build and we expect the Board will continue its process of ‘re-profiling’ to more adequately address the defence sector,” Searle wrote.

“Simply stated, under Mr. Raun’s leadership OSS has architected the current AI Transportables strategy that has driven new product development (i.e., the Rigel edge compute platform), end market focus (including defense), and the overall targeting of higher margin business opportunities. We believe Mr. Raun’s ongoing involvement is key for OSS,” he said.

On OSS’s financials, Searle is forecasting revenue to go from $72.4 million in 2022 down to $69.7 million in 2023 and then to $87.2 million in 2024. On EPS, the analyst has forecasted a development from $0.16 per share in 2022 to $0.13 in 2023 and to $0.34 in 2024.

With the update, Searle maintained a “Buy” rating on the stock and $7.00 target price, which represented at the time of publication a projected return of 182 per cent.