We might have forgotten about Kraken a bit, but it is swimming nicely against the current in a dismal microcap market and is raising its guidance for the current year.
A fresh article on Kraken Robotics in Arvopaperi.
Kraken Robotics is a Buy – Geopolitical Tensions Benefit This Defense Industry Growth Rocket
An excerpt from the article, advantages over competitors:
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High-precision imaging from a long distance is considered a technological advantage. One key benefit is also that the sonar can see even in low-visibility conditions.
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With Katfish, images can be processed in real-time, whereas competitors process images after the recording, which is a key competitive advantage.
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High-pressure resistant batteries. According to the company, the batteries can withstand the pressure at depths of up to six kilometers. A key competitive advantage is the technology that allows batteries to be placed in silicone-based encapsulation instead of traditional titanium-based encapsulation. This reduces the weight of the batteries and lowers their price compared to competitors’ equivalents.
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Lighter batteries than those of competitors improve operating time, which can be critically important in operational missions.
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The company also has a service business (SaaS), which includes, for example, an image processing system. Like other SaaS companies, it is provided as a recurring subscription service.
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In addition to the defense industry, Kraken serves the civil industry, but based on the company’s releases, growth is driven by the increased demand in the defense industry. According to Echelon’s estimate, about 80 percent of the revenue comes from defense industry players.
Kraken Robotics
Estimated Discount To Fair Value: 42.7%
Kraken Robotics is trading at CA$1.82, significantly below its estimated fair value of CA$3.18, reflecting potential undervaluation based on cash flows. Recent orders totaling $16 million for SeaPower batteries and MINSAS systems enhance revenue prospects, while a CAD 45 million equity offering strengthens its financial position. Kraken’s earnings are expected to grow significantly faster than the Canadian market average over the next few years, supported by strategic alliances and expanding international defense contracts.
Kraken Robotics has once again been recognized in the prestigious Marine Technology Reporter Top 100!
Kraken Robotics Demonstrates New KATFISH Autonomous Launch and Recovery System to Navy Customers
ST. JOHN’S, Newfoundland and Labrador, Nov. 04, 2024 (GLOBE NEWSWIRE) – Kraken Robotics Inc. (“Kraken” or the “Company”) (TSX-V: PNG, OTCQB: KRKNF) announces the completion of demonstrations for its new Autonomous Launch and Recovery System (ALARS) for KATFISH™ towed synthetic aperture sonar (SAS). The Company performed demonstrations for more than 40 naval customers and partners from October 21-25, 2024 in Halifax Harbour, Nova Scotia.
“This was a great opportunity to both test our new ALARS and demonstrate KATFISH for key naval clients,” said Greg Reid, President and CEO of Kraken Robotics. “The ocean is an unforgiving environment, and the highest risk to technology and personnel is during launch and recovery. Demo participants were able to witness our technology in action, observing both the advanced autonomy of the ALARS as well as the high-resolution real-time SAS data from KATFISH while aboard the vessel.”
Fault in the undersea cable between Finland and Germany – telecommunications connections cut
Russian spy ship caught off the coast of Britain “lurking around pipes and internet cables”
Cable between Sweden and Lithuania also cut
Indeed.
I thought Kraken’s Q3 results would be released next week, but they came out yesterday. Below is a table made by ChatGPT.
Slightly mixed feelings. Device sales are weak, but on the other hand, the potential of services is starting to show. Additionally, the growth in sales of underwater battery solutions was praised.
I’ve been following this with interest together with Mind. Kraken has performed quite similarly to Mind, although its valuation is 10 times higher. The war has naturally increased Kraken’s valuation multiples more. The product repertoire is slightly more geared towards defense.
Regarding the earnings report: this is indeed a disappointment and in my opinion does not justify these multiples. The increase in services is naturally a good thing, but the bottom line figure is nevertheless dismal. A lot of storytelling will be needed in the conference call to spin this positively. It makes me wonder how much the market situation reflects on Mind, even though Kraken’s problems also seem to be more in production than in demand.
The current valuation level is quite stretched to its limits. Up 31% in a month without news, and now we even got a weak Q3 result. I was planning to buy and almost could have made the purchase at these levels, but with the result, I’ll follow from the sidelines for now.
Management reiterated its guidance, and it can be achieved even if there’s a small decrease from last year’s Q4 result.
In Arvopaperi, analysts’ forecasts for this year were mentioned as 96 million in revenue and 22 million in EBITDA. Revenue should grow by 17.2% and EBITDA by 45.0% to reach this. Revenue is achievable, but EBITDA will likely fall a bit short.
Another thing I’m looking forward to with interest is the guidance for next year. What kind of growth does management predict?
What’s good about the strong 121% growth in services is the continuously billed Saas (Software As Service) model, from which a recurring revenue stream can be expected from customers. Production is currently being ramped up, so there is potential to meet customers’ future growing demand. They really praised the price-quality ratio and competitiveness of Kraken’s products for sale in Arvopaperi (the best on the market + patented products). We will stay tuned for new agreements.
The headline was probably a “buy” recommendation: That’s what Kraken was at the time of writing the article, price 1.60 CAD, and no information about the earnings report yet. I’m not saying Kraken isn’t still a good investment. Mainly, one should consider how quickly these small companies can catch up in valuation. Would the article’s author still have agreed at 2.60 and especially now after the earnings report?
I’ve meant to write here several times about this company after finding it. Too bad this thread wasn’t found earlier 
In August, I was already opening a position but I went almost all-in on IREN. I did manage to make a small opening position here. The intention is to grow it to 5-10% when the portfolio is more balanced.
Here’s a good place to start getting to know the company: https://x.com/transhumanica/status/1980263840752500854?t=7875RzqKl6DH0Dn7QROBfw&s=09
Trump’s tweets related to this are also bullish.
The company has clearly gained more attention on X and the stock price of a small market cap company easily starts to rise. With this, we will probably still see volatility and opening/adding opportunities will arise.
I’ve been wondering if Anduril