Biometric Identity And Cloud Security Expansion Will Drive Long-Term Upside Potential

Catalysts

About Fingerprint Cards

Fingerprint Cards develops biometric hardware and software that secure digital and physical identity across devices and cloud environments.

What are the underlying business or industry changes driving this perspective?

• Expansion of passwordless and identity-centric security, reinforced by high profile breaches and Microsoft Entra integration, positions FPC to capture recurring software and cloud revenues that can outgrow its historical hardware base and lift overall revenue growth.
• Ongoing shift from standalone sensors to integrated AllKey systems with roughly three times higher average selling prices should increase wallet share per device and support sustained top line growth while keeping gross margins near the current high levels.
• Growing need for high efficacy biometrics in border control, mass transit and automotive applications through Iris and Smart Eye partnerships broadens the addressable market, supporting multi year diversification of revenue beyond legacy mobile and PC volumes.
• Monetization of in demand ASIC, algorithm and identity capabilities via structured asset and royalty deals adds a lumpy but high margin revenue stream that can accelerate EBITDA improvement and improve cash generation over the next several years.
• Embedding AI and agent based automation across marketing, engineering and corporate functions enables revenue growth without proportional headcount increases, supporting operating leverage, higher net margins and a faster path to positive earnings.

Assumptions

How have these above catalysts been quantified?

• Analysts are assuming Fingerprint Cards's revenue will decrease by 41.6% annually over the next 3 years.
• Analysts are not forecasting that Fingerprint Cards will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Fingerprint Cards's profit margin will increase from -74.9% to the average GB Electronic industry of 8.1% in 3 years.
• If Fingerprint Cards's profit margin were to converge on the industry average, you could expect earnings to reach SEK 6.8 million (and earnings per share of SEK 0.9) by about December 2028, up from SEK -316.1 million today.
• In order for the above numbers to justify the price target of the analysts, the company would need to trade at a PE ratio of 47.0x on those 2028 earnings, up from -0.5x today. This future PE is greater than the current PE for the GB Electronic industry at 26.3x.
• 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 6.43%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• The strategy depends heavily on asset monetization deals that are inherently lumpy and often tied to discontinued operations. If new partners or large one off transactions fail to materialize at the same pace, the company could see volatile or declining revenue and slower progress toward positive earnings and cash flow.
• New software and cloud identity initiatives, including the Anonybit partnership and Microsoft Entra integration, are still pre revenue and may ramp more slowly than expected in a competitive and fragmented identity security market. This would limit the anticipated mix shift to higher quality recurring revenue and constrain margins and long term earnings growth.
• The move from standalone sensors to AllKey systems assumes that at least half of the customer base will migrate over the next few years. If high volume customers remain with low margin sensors or alternative suppliers, the company may not achieve the targeted uplift in average selling prices, leaving revenue growth and gross margins below expectations.
• Although headcount has been cut by more than 50% and AI agents are being used to scale operations, this lean model may struggle to support simultaneous expansion in Iris, automotive, cloud identity and payments. This increases execution risk and could pressure revenue growth and net margins if delivery or product development falls behind.
• The legacy mobile and PC businesses that represented the majority of historic revenue are being run off and will disappear from reported figures by 2026. If replacement demand from Iris, identity cloud and payments remains slow or pilot driven, the company could face a structural revenue gap that delays or reverses improvements in EBITDA and overall earnings.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The analysts have a consensus price target of SEK35.0 for Fingerprint Cards based on their expectations of its future earnings growth, profit margins and other risk factors.
  
• In order for you to agree with the analysts, you'd need to believe that by 2028, revenues will be SEK83.9 million, earnings will come to SEK6.8 million, and it would be trading on a PE ratio of 47.0x, assuming you use a discount rate of 6.4%.
  
• Given the current share price of SEK20.35, the analyst price target of SEK35.0 is 41.9% 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.