Touchless Sensing Will Unlock Market Opportunities With Intel And Lenovo

Key Takeaways

• Accelerating adoption of software-based AI sensors and deepening OEM partnerships drive scalable revenue opportunities and sustainable licensing income across multiple device categories.
  
• Focus on energy efficiency, privacy, and innovative features positions the company to benefit from shifting consumer and regulatory demands in the smart device market.
  
• Over-reliance on new device launches, key partner risk, and rising competition threaten revenue stability and profitability, with continued negative earnings raising questions about scalability and growth predictability.

Catalysts

An artificial intelligence (AI) software company, engages in the provision of AI virtual smart sensors for the smartphone, laptop, Internet of Things, and automotive markets in Norway, the United States, China, South Korea, Taiwan, and Japan.

• Rapid expansion in both the laptop and smartphone markets-evidenced by nearly double the number of AI Virtual Smart Sensors launched in laptops YTD vs. last year, and firm commitments for at least 45 more smartphone models-signals that adoption of touchless, AI-powered sensing is accelerating and that revenue could scale significantly in the coming quarters as these devices ship in volume.
  
• The company's platform-agnostic, fully software-based model (which allows deployment via software updates rather than hardware cycles) lowers the barrier to entry for OEM integration and minimizes incremental costs, setting the stage for stronger net margin expansion as deployment volumes increase across devices and verticals.
  
• Deepening partnerships with major ecosystem players like Intel and Lenovo, and the move toward co-engineering of next-generation AI features in Intel's laptop roadmap, increase the probability of recurring design wins and volume-based licensing revenue, supporting a sustainable uplift in contract base and future earnings.
  
• Continuous innovation and development of new sensors and features (such as the AI Virtual Tap to Share sensor and dual-sensor configurations) create new avenues for device interoperability and multi-functionality-addressing the proliferation of smart devices and expanding the company's total addressable market to drive long-term revenue growth.
  
• The emphasis on energy efficiency, device intelligence, and privacy-respecting sensors (inflated by regulatory and consumer demands for greener, non-camera-based solutions) positions Elliptic Labs to benefit disproportionately as these factors become standard purchasing criteria, supporting higher ASPs (average selling prices) and improved gross profitability in new device generations.

Elliptic Laboratories Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Elliptic Laboratories's revenue will grow by 49.5% annually over the next 3 years.
• Analysts assume that profit margins will increase from -0.3% today to 46.3% in 3 years time.
• Analysts expect earnings to reach NOK 210.8 million (and earnings per share of NOK 1.16) by about July 2028, up from NOK -426.0 thousand today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 11.8x on those 2028 earnings, up from -3237.7x today. This future PE is lower than the current PE for the NO Software industry at 45.5x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.63%, as per the Simply Wall St company report.

Elliptic Laboratories Future Earnings Per Share Growth

Risks

• Continued heavy dependence on expanding the number of device models-rather than increasing sales volume from existing models-means that if new product launches slow or OEM partners reduce adoption rates, top-line revenue growth could stagnate or decline, directly impacting future revenues.
  
• Sustained negative EBITDA (albeit improving) and ongoing R&D investments, combined with only modest increases in cash position, highlight persistent profitability risks if product adoption or licensing terms do not scale rapidly enough, which could compress net margins and delay or restrict positive earnings.
  
• Management repeatedly emphasizes partnerships and deepening integrations with leading OEMs (such as Intel and Lenovo); such high revenue/customer concentration exposes Elliptic Labs to the risk that loss or reduced volumes from a single major OEM could cause a sharp decline in revenue and profitability.
  
• The company points to rapid innovation and platform-neutral, software-based sensing as key differentiators, but increasing competition from larger platform providers (Google, Apple) pursuing similar in-house solutions, as well as alternative sensor technologies, could diminish Elliptic's market share and force price reductions, eroding both revenues and profit margins over time.
  
• Quarterly revenue volatility, as acknowledged by management (largely tied to milestone payments, launch schedules, and shipment timing), combined with exposure to USD-NOK currency fluctuations, introduces ongoing earnings unpredictability that could make sustained long-term profitable growth more challenging.

Valuation

• The analysts have a consensus price target of NOK19.0 for Elliptic Laboratories based on their expectations of its future earnings growth, profit margins and other risk factors.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be NOK455.1 million, earnings will come to NOK210.8 million, and it would be trading on a PE ratio of 11.8x, assuming you use a discount rate of 7.6%.
• Given the current share price of NOK13.1, the analyst price target of NOK19.0 is 31.1% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.