In our most recent article regarding Identiv (INVE), we introduced the company and its potential revenue streams related to the post-password-era and numerous recent data breaches.  We compared some metrics and valuation to its competitors demonstrating a confusing disparity and likely poor investor relations job.  Today, we will continue with the most recent developments for the company along with its NFC capabilities and how Apple indirectly helped them by adopting the technology in its newest iPhone. 

At the time of our previous article a few weeks back, Identiv’s stock was trading around $9/share.  It has already made some progress since then.  However, it has a long way to go to receive a fair valuation that we commented in the first article as $27/share.  Even if $27/share was achieved, it would still be a lower valuation than the CEO’s opinion as of the Q2 2014 earnings call when he said, “I’ve often commented internally that Identiv is a $400 million company.”  

Upcoming Events:

With several potential catalysts upcoming, at least a portion of the current valuation gap may be closing.  During the Q3 earnings call in November, CEO Jason Hart mentioned that it has started to negotiate “PR clauses” in its contracts, giving the company the ability to let the market know more.  This would be the opposite of the typical detective work necessary to gain information about its partners and customers that has clearly frustrated shareholders.  Hart said there were two major customers at that time who had signed off on those types of contracts, and the market would know once the roll out begins.  There is some anticipation regarding when this will happen and who these new customers or partners will be.

In addition to the potential press releases upcoming regarding these new partners or customers, the company will attend and present at a conference this week on December 10^th and 11^th.  This security investor conference is located at the Waldorf Astoria Hotel in New York City.  This is a good opportunity for the company to meet with the right kind of institutional investors. 

Recent Fund Interest and Coverage

With regards to institutional investors, an interesting SEC filing came out last week showing at least one group who has been accumulating a lot of Identiv shares.  Royce & Associates, LLC, out of New York City, was required to file a 13G form since the fund now owns over 5% of Identiv’s stock.  Within the filing, we see that Royce now has 826,263 shares of Identiv, representing 7.76% of the company.  With $33 Billion in assets, clearly Identiv has attracted the attention of at least one successful fund. 

Along with the SEC filing, new analyst coverage was also announced in the past week.  Northland Securities gave an “outperform” rating to Identiv stock, with a price target of $21/share.  This new rating accompanies the October target increase by Cowen and Associates to $24/share.  The positive sentiment for Identiv appears to be steadily catching on with fund managers and analysts.  We expect more to join in as word spreads about the partnerships Identiv has cemented as well as the profitable and aggressive growth expectation for the company and sector. 

uTrust and Identity as a Service

Identiv has already made quite a lot of traction recently with its uTrust platform which encompasses Identity as a Service (IaaS).

Some of the characteristics of uTrust are:

• Single Trusted Credential to access information
• Standards based Logical Access System with BYOD support
• Trusted access to PCs, networks and information
• Contact and contactless USB readers
• Desktop, portable, and mobile
• Connect to cloud, apps, and ERPs everywhere

A video demonstrating this credential solution  demonstrates cloud based deployment while giving the user convenience and flexibility when completing actions such as adding new employees or removing termed ones quickly. With these products now having the Verizon stamp of approval, it has already created additional deals for Identiv.

Another customer that has been introduced within this category of products is Cisco (CSCO).  Although the details haven’t been made public on how this deal will impact Identiv, speculation is that the uTrust and IaaS products will be used for all or a majority of Cisco’s 72,000+ employees.

NFC impact to Identiv

While Identiv has already landed partnerships with large companies such as Cisco and Verizon in one area of product offerings, the company also has many opportunities in the Internet of Things (IoT) and near-field communication (NFC). 

One thing the technology does is allows smartphones to communicate wirelessly with other devices such as point-of-sale terminals. Proponents believe it is ideal for secure payment systems and could eventually replace credit cards.  At an event in September, Apple (AAPL) CEO Tim Cook demonstrated Apple Pay, which uses NFC chips built into the company's iPhone 6 and Apple Watch.

While NFC technology will impact payment systems, it also can create communication with everyday items such as toys, medicines, and consumer products.  This allows item tracking and quality control to verify product authenticity.  A self-powered ultra slim NFC tag can be integrated into any item. 

For Identiv, at least one way the company has used NFC tag sales is to enrich the electronic toy and gaming user experience.  At a recent conference in Boston, the company showed Disney (DIS) Infinity Toys as its “customer example,” related to IoT and NFC.  According to an August article by TMC.NET, more than half of the 200 million NFC tags Identiv shipped in 2013 likely went to Disney:

“The company has shipped 200 million NFC tags over the last 12 months, Hart told NFC Times, which includes 100 million tags for electronic gaming figurines shipped in 2013. Those gaming-related tag orders had all come from a single customer, a spokeswoman told NFC Times in November 2013, but the company has consistently declined to name that customer. It is believed to be Disney Interactive for its Disney Infinity figurines. Hart described RFID-tagged toys as 'an area of growth' for Identiv during the company's first quarter earnings call in May 2014.”

With the adoption of NFC in the iPhone 6, we feel it will help change the game for Identiv.  Because Apple is a trend setter, we think adoption will slowly gravitate towards mainstream acceptance for this technology along with other companies trying to keep up and follow the leader.  When Apple Pay was rolled out, many credit card companies and banks immediately came on board to partner with Apple, including Wells Fargo (WFC) and Capital One (COF). Along with companies coming on board to keep up with the tech, consumer information security will be a key element.  All of these areas are opportunities for Identiv along with what they have already invested its resources in providing. 

Conclusion

Identiv leverages a broad patent portfolio in the security and identification space to offer its integrated solutions across premises, information and IoT.  The company has over seventy-five patents in key areas across readers, smart cards, RFID, NFC, authentication and access control.  We feel the proprietary technology and internal knowledge enables Identiv to offer a broader, more unified solution than competitors.

We will see how the adoption of NFC goes with regards to payment systems.  Regardless if it catches on there, the Internet of Things has already become a strong revenue stream for many companies and will continue to do so.  Identiv is well positioned to be a player within this space and continues to attract large customers. We think the Cowen price target of $24 is fairer than Northland’s $21 as we assign a $27 target for the stock in addition to believing Identiv has a good shot to be acquired within the next year.  Some of the bigger names in the industry continue to invest copious amounts of money into IoT which should lead to consolidation within the segment.