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A Short Squeeze In Ocean Power Technologies Inc (NASDAQ:OPTT)

A Short Squeeze In Ocean Power Technologies Inc (NASDAQ:OPTT)
Written by
Alex Carlson
Published on
July 21, 2016
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We alerted our subscribers last month for the potential of a short squeeze in Ocean Power Technologies Inc (NASDAQ:OPTT). Shares exploded higher at the beginning of June after the company signed a PB3 PowerBuoy lease agreement with Mitsui Engineering and Shipbuilding (MES) valued at approximately $975,000. We said that "it won’t take much to get the stock moving to higher levels." This was also because short sellers were short nearly 10% of the float.Then in the last week, Ocean Power Technologies delivered a 1-2 punch to the shorts. First, the company announced the deployment of its commercial design of the PB3 PowerBuoy approximately four miles off of the coast of New Jersey. OPTT said that "the commercial PB3 incorporates multiple enhancements over early prototypes including a redesigned power take-off (“PTO”), a high-capacity, modular energy storage system (“ESS”) providing flexibility through expanded battery capacity, a higher voltage and efficient power management and distribution system, and a new auto-ballasting system which the Company believes allows for faster and less costly deployment."Basically, the commercial PB3 is the company's latest and greatest. It also puts OPTT one step closer to commercialization. OPTT said that "the company anticipates that this deployment will be the final validation of the PB3 prior to the anticipated March 2017 six-month lease of the PB3 PowerBuoy under a previously announced customer agreement." CEO George Kirby chimed in with his positive spin on the announcement when he said:

“We are delighted to announce that we now have two PB3 PowerBuoys deployed off of the coast of New Jersey, with one of them being our anticipated commercial PB3 product offering. This deployment of our PB3 represents what we expect will be the final validation step prior to release of the product to our target customers and markets. We believe that our commercial PB3 PowerBuoy will position us to competitively address applications in our target markets such as ocean observing, oil and gas, security and defense, and communications. As per our previously announced plan, this deployment represents a major milestone in our commercialization strategy enabling us to put our product in the hands of our customers. I am very proud of this critical company achievement.”

Second, OPTT announced its financial results for the fiscal 4th quarter as well as its fiscal full year results. On the surface, there was nothing to get excited about in the numbers. What we think got the market interested was the comments again from CEO George Kirby. He said:

"As we begin fiscal 2017, we continue to take important steps toward our commercialization efforts. This week we announced the deployment of our second PB3 off of the coast of New Jersey, which is our intended commercial PowerBuoy and includes a number of enhancements from our earlier PowerBuoy designs. In June, we announced our agreement with MES which includes our first commercial PB3 PowerBuoy lease. We also redeployed the PB3-A1 off of the coast of New Jersey with a payload from the National Data Buoy Center, which we believe will show multiple stakeholders the benefit of persistent power and communications through our integrated PowerBuoy solution. Additionally, this deployment includes a Wildlife Conservation Society (WCS) sensor that will provide WCS with invaluable data concerning the viability of our PB3 PowerBuoy for their applications of interest. While these deployments focus initially on the ocean observing market, we believe that other markets such as oil and gas, security and defense, communications, and offshore wind will derive significant benefits from our PB3 PowerBuoy power and communications solution as well."

The key here is that he reiterated that the company is closer than ever before to commercialization and that there are other markets where the PB3 can be deployed. The oil and gas, security and defense, communications, and offshore wind sectors are all a target market for the PB3. This opens up the company to a lot of potential deals, revenues and profits.In the short term, we expect the stock to pull back as investors book profits. However, we view OPTT as a long term play and recommend buying the pullback. Investors need to keep in mind that OPTT has a low float and a tiny market cap. There are only 2.5 million shares outstanding and the current market cap is just $34 million. OPTT says that the PB3 addresses an immediate market of $75 million. Further down the road, OPTT sees the PB3 addressing a $1.2 billion market.OPTT is the second multi-bagger for Insider Financial and our subscribers this month. Our other big pick was ParkerVision Inc (NASDAQ:PRKR). To get more alerts like OPTT and PRKR, sign up below!Disclosure: We have no position in OPTT and have not been compensated for this article.

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