Is OPTT Stock a Smart Investment in Ocean Energy?

Time to review another small cap stock, or better said a penny stock on this case. Remember that from time to time we are reviewing some small cap stocks with growth potential and if you are interested, we are also doing a couple of investment challenges with only £10 a week, one for dividend stocks and other for growth stocks, but for now, let’s jump in reviewing today’s choice, Ocean Power Technologies.

Ocean Power Technologies (OPT) is making waves—literally and figuratively—in the renewable energy sector. Specialising in harnessing the power of ocean waves, OPT aims to provide sustainable energy solutions for various offshore applications. Let’s dive into what the company is all about, how it’s performing financially, and whether its stock is worth considering.

Background of Ocean Power Technologies

Founded in 1984 and headquartered in Monroe Township, New Jersey, OPT has been a pioneer in developing systems that generate electricity by capturing the renewable energy of ocean waves. Their flagship product, the PB3 PowerBuoy®, is designed to provide reliable power in remote offshore locations, catering to industries such as defense, offshore oil and gas, and scientific research.

In recent years, OPT has expanded its offerings to include subsea battery systems and autonomous vehicles, aiming to enhance ocean monitoring and data collection capabilities. This diversification reflects the company’s commitment to innovation in ocean-based energy and technology solutions.

Recent Earnings Report: Q2 Fiscal 2025

The latest earnings report that we have found is from December 2, 2024. In that report, Ocean Power Technologies announced its preliminary financial results for the second quarter of fiscal year 2025 (ended October 31, 2024). Here are the key takeaways:

• Revenue: The company reported record quarterly revenues of $2.4 million compared to $0.9 million for the same period last year, that is 2.7x increase!
• Net loss: $3.9 million compared to the $7.2 million in the prior year period, so there is some reduction too with a decrease of 46%. Their operative expenses where reduced by 41%.
• Cash used in operating activities: $4.8 million compared to the $7.5 million in the prior year period, so that is 37% less.
• Profitability Outlook: The company confirmed a pathway to profitability by late 2025, based on its current financial trajectory.

The results are making significant strides towards financial stability that is clear.

Stock Performance

As of January 31, 2025, OPTT is trading at approximately $0.66 per share. Over the past year, the stock has experienced volatility, mostly on the rise as we can see just on the last year the stock has gained 118.62%.

Investors should be mindful of the stock’s historical fluctuations and the factors influencing its performance, including technological advancements, regulatory changes, and market demand for renewable energy solutions.

Is Ocean Power Technologies Stock a Good Value?

Assessing the value of OPTT involves considering several factors:

• Market Potential: The global focus on renewable energy presents significant opportunities for companies like OPT. Their unique technology positions them to capitalize on the growing demand for sustainable offshore power solutions.
• Financial Health: While the company is not yet profitable, the recent reduction in operating expenses and the projected pathway to profitability by late 2025 are encouraging signs.
• Risks: As a smaller company in a niche market, OPT faces challenges such as technological risks, competition, and the need for continuous innovation.

Given these considerations, OPTT may appeal to investors with a higher risk tolerance who are optimistic about the future of ocean-based renewable energy.

Key Recent Developments

OPT has been active in advancing its strategic initiatives:

• Secured $2 million in Latin America: The company announced a new partnership, with an initial $2 million of purchase orders in Latin America. The purchase orders are for OPT’s Next Generation PowerBuoys®, which utilize a combination of wave, solar, and wind power generation.
• Product Innovation: OPT demonstrated multi-day advanced remote survey capabilities, which with the CEO of Ocean Power Technologies was very enthusiastic, “This is a ground breaking milestone for OPT. The technological capabilities of our WAM-Vs can now be deployed for multiple days in over the horizon operations. Having previously demonstrated the ability to deploy for multiple days, the recently implemented design changes now enable full operations over extended time periods. This opens up entirely new operating approaches for our customers, leading to enhanced efficiencies and opening up new markets for OPT.”

Analyst Opinions and Price Targets

Analyst coverage of OPTT is quite limited and we didn’t managed to find any coverage, reflecting its status as a smaller company within the renewable energy sector. Investors should consider the lack of analyst insights when making investment decisions and may need to rely more heavily on their own research and risk assessment.

Future Outlook: What’s Next for Ocean Power Technologies?

Looking ahead, several factors will be crucial for OPT’s success:

1. Achieving Profitability: Meeting the projected timeline for profitability by late 2025 will be a significant milestone if they manage to achieve it.
2. Market Expansion: Successfully entering new markets and securing additional contracts, particularly in the defense and offshore energy sectors, will be vital.
3. Technological Advancements: Continuing to innovate and improve product offerings will help maintain a competitive edge.

Should You Buy or Sell OPTT Stock?

Investing in OPTT requires careful consideration:

• Bullish Perspective: If you believe in the potential of ocean-based renewable energy and are encouraged by OPT’s recent financial improvements and strategic initiatives, the stock could be a worthwhile addition to a high-risk, high-reward portfolio.
• Bearish Perspective: If concerns about the company’s current lack of profitability, market volatility, or technological risks outweigh the potential benefits, it may be prudent to wait for more concrete signs of sustained financial performance. You have remember that the stock looks quite ‘pricey’ at current level after rising over 100% recently.

Ocean Power Technologies is at an intriguing juncture, with promising developments in its financial performance and strategic direction. While challenges remain, the company’s focus on innovation and expanding market applications positions it as a noteworthy player in the renewable energy landscape. As always, thorough due diligence and alignment with your individual risk tolerance are essential when considering an investment in OPTT.

If Ocean Power Technologies is not for you, have a look on our Top 5 Small Cap with impressive growth estimates, the Top 5 Small Cap Crypto players or the Top 10 Quantum Stocks for the long term that can give you more ideas in your investment journey.