This Little-Known Name Is on My Radar as Market Action Deteriorates

Market action is deteriorating on Monday morning, with only 31% of stocks advancing, and the Russell 2000  (IWM)  is lagging, down 1.4%, as I write. The Magnificent Seven  (MAGS)  is helping to hold things up with a gain of 1.25% but only 25% of stocks in the Nasdaq 100  (QQQ)  are in positive territory.

There is significant pressure on more speculative stocks, especially biotechnology  (XBI) , which is down 4%. News that the FDA changed the study parameters for uniQure  (QURE)  sent the stock plummeting 60% and shook up other names in the sector. The FDA has created a tremendous amount of uncertainty with high turnover in personnel, as well as changing requirements in groups such as gene therapy.

Dozens of stocks that I trade will be releasing earnings reports in the next two weeks. These smaller stocks can trade very randomly and have a higher risk of surprise news. I try to reduce risk to some degree when a report is due, but the best defense is understanding what you own and the potential for surprises.

One stock that I find quite interesting going into its earnings report is a very small and thinly traded name. NeoVolta (NEOV) designs, develops, and manufactures energy storage systems primarily for residential solar applications in the U.S. Their products allow homeowners with solar panels to store electricity (from solar or the grid when it's cheaper) and then use it later (at night, during an outage, or when rates are high) rather than relying solely on real-time grid power. 

The company emphasises safety and modern battery chemistry, particularly lithium-iron-phosphate (LFP), which is less prone to overheating/fire risk than older lithium-ion types. NeoVolta competes against Tesla's  (TSLA)  Powerwall technology but has a number of strategic advantages, including a safer battery, a longer cycle life, and a lower price.

What is most interesting about NeoVolta is that they are just starting to ramp up sales. The company announced that it expects $6.5 million in sales in the September quarter, versus just $600,000 in the same quarter last year and $4.8 million in the June quarter. Sales should continue to ramp up quickly in future quarters.

NeoVolta recently bought the assets of Neubau Energy, which has a manufacturing base in Austria and helps deal with issues related to tariffs. It developed a next-generation residential battery storage architecture described as "the first truly modular residential battery system" with high energy density. Their system integrates batteries, an inverter, a battery-management system, and communications into a single module, which is marketed as installable by "one person in under 30 minutes."

This is a very small company and doesn't have any major analyst coverage. What is most apparent is that they are ramping up very aggressively and should see very strong revenue growth. The stock is thinly traded, which causes a high level of volatility. The recent pullback after a strong earnings report reflects inefficient pricing. 

NeoVolta will be reporting earnings later in November, and with revenues already preannounced, that reduces risk.

I am holding a position and will aggressively trade it as it develops. I'm optimistic about the pace of revenue growth and positive upward revisions in guidance.

It is important to keep in mind, that small stocks like this have much higher risk and also will be much more volatile. They will move significantly on any news flow.

Please note that due to factors including low market capitalization and/or insufficient public float, we consider NEOV to be a small-cap stock. You should be aware that such stocks are subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information, and that postings such as this one can have an effect on their stock prices.

At the time of publication, Rev Shark was long NEOV.