Zacks Small Cap Research – SVRE: Domestic operations struggled in the first half of 2024. The company’s focus remains on controlling costs. – Technologist

By Brian Lantier, CFA

NASDAQ:SVRE

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Domestic operations struggled in the first half of 2024. The company’s focus remains on controlling costs.

SaverOne 2014 (NASDAQ:SVRE) reported results for the first half of 2024 last night with total revenues for the period of just $129k USD. While revenues are not the main focus for a company at this stage of development, we have been surprised by the slow pace of new orders. The domestic situation in Israel is having a greater impact on results than we anticipated and we have taken that into account in adjusting our model. Our new model lowers the revenue outlook for the next 12 months and cuts the projected R&D investments as the company aims to control costs.

The company announced a small acquisition of a business line from Micronet (an Israel-based company). In December 2023, SaverOne announced plans to merge with Micronet but there had been no updates since that announcement. We believe the product line acquired (an in-vehicle camera line) could be a good fit with SaverOne’s existing product offerings.

Since our initiation in February, the company has been actively raising funds through its standby equity agreement and the share count has nearly doubled in the past 6 months. Our concerns over dilution appear to have been well-founded and we do not see this trend reversing. The company has a very good technological platform and it is targeting a market that is poised for very strong growth but we are concerned that the dilution risk facing investors may exceed the opportunity.

VALUATION

Given our reduction in the forecast for revenues in 2024 and 2025, we’ve adjusted our target valuation for the company to roughly $20 million while increasing our projected ADS count to 38 million by 6/30/25. Thus, our new target valuation for the shares is $0.52/share but we recognize that many of the calculations that go into that target are highly variable and we will adjust our target as needed if the share count projections prove to be inaccurate.

If the company is able to secure a less dilutive form of financing or if it successfully spins off the VRU unit (resulting in a cash injection for SaverOne) we will reevaluate our valuation target.

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