This week in biometrics industry stocks

June 30, 2017 - 

As the biometrics industry continues to grow, BiometricUpdate is bringing a new focus to the stories around the stocks in the sector. Check in with this space each Friday for a rundown of the financial news and interesting ideas from the week that was.

– It was another volatile week in the markets. Just two weeks ago tech stocks plunged before making a recovery. And so it was this week. The Nasdaq 100 Index shed 2.3 percent over just two days early in the week. Reasons cited included a worry that President Trump’s travel ban would make it difficult for talented IT workers to obtain work visas. The fine the European Union applied to Google for violating anti-trust regulations contributed to the negative outlook on the so-called FANG stocks (a group that includes Facebook, Apple, Netflix and Google). By the end of the week the sector had recovered, however, and that leaves the tech sector still up 20 percent year on. Many market analysts are still wary that stock valuations are too high. Overall shares prices are at the high end of their historical valuations. The long-term price-to-earnings (P/E) basis ratio on stocks is between 20 and 25. The market as a whole is trading above that right now. Though, many analysts point out that interest rates are historically low right now, which makes bonds less attractive as an alternative risk-adjusted investment. Until rates begin to rise, arguably, stock markets can keep trading at this level. With few predicting any substantial rise in rates any time soon the rapid recovery is not that surprising.

– The appearance of another ransomware virus contributed to the pessimism earlier this week. Just weeks after the WannaCry ransomware attack hit the Petya attack struck computers from Ukraine to the UK parliament. The attacks are disturbing — the containment system at Chernobyl was hit — but the attacks also had the effect of stirring talk up about the importance of biometrics. A couple of examples:

– An article in a trade magazine targeting IT professionals in the health care industry noted that, “Ransomware attacks highlight critical need to move beyond just usernames and passwords.” According to the piece, “Hospitals not already using modern tools for two-factor authentication, such as facial recognition and push notifications, should take note of how they can block malware and other common cyberthreats.” The writer went on to quote stats from The Office of the National Coordinator for Health IT, which “tracks hospitals using two-factor authentication.” A 2015 report from that organization found that, “… half of non-federal acute care organizations had the technology and, since that was up 53 percent since 2010, it’s a reasonably safe bet that even more hospitals have two-factor authentication today.” The story went on to debate the inconvenience two-factor authentication can introduce to the user experience: “Two-factor authentication does hurt the system user experience, there is no doubt about it. [But] the world is today online, the sort of free-wheeling experience of decades ago is no longer possible for us to be able to conduct every aspect of our lives online without the expectation to take the extra step or two to protect online activities. The challenge is to make it as convenient as possible.”

– Another story in an insurance industry trade journal recommended that companies use multi-factor authentication for remote log-ins. According to the report it’s important that companies implement a system that makes use of, “… two of the following three factors of authentication: something you have, something you are or something you know… Remote log-in should require a password plus the code from a security token, with numbers that change every 30 seconds, or a biometric factor, such as a fingerprint scan on an iPhone.”

– The big news within the sector this week: Fit Pay, a subsidiary of NXT-ID, announced it will provide payment capabilities for Token, a biometric identity ring that, “…streamlines the process of authentication throughout your day.” By combining secure, contact-less authentication into a ring that uses two-factor identification to confirm identity users enjoy an early form of single-pass entry into the IofT. Get rid of keys, fobs and cards — put it all on one silver ring that delivers a, “… sleek, fashionable form factor,” into biometric-based access devices. In the age of the selfie, sophisticated personal aesthetics and design appreciation this could be a product that catches on. How much of Apple’s money came from a design that outpaced the clunky Microsoft look. Michael Orlando, president of Fit Pay and COO of NXT-ID, seems excited about the future. In the press release he was quoted as saying, “Its launch helps push the adoption of contactless payments towards an inflection point.” He seems to be on to something: Stock in NXT-ID rocketed from an early morning low of $1.33 to close at $2.87 over the trading day Thursday for a 73% gain. Talk about frictionless.

– A Deutsche Bank analyst reiterated his “buy” rating on shares of Nuance Communications recently. The bank currently has a $25.00 price target on the stock. The company’s shares are currently trading just under $18.00 a share, suggesting a possible upside of more than 35%. Last month the investment bank Stifel Nicolaus increased their price target on shares of Nuance from $16.00 to $19.00.

– Nasdaq announced this week that a new company in the biometric space, TC Connect AB, will begin trading on the Nasdaq North market in Stockholm. Shares will trade under the symbol TCC. According to a press release TC Connect was founded in 2005 and is, “… a B2B security company delivering solutions within digital communications and biometric access control systems.” Since its inception, the company is said to have completed more than 150 projects. The company is headquartered in Stockholm and has 40 employees across Norway and Sweden. The company’s CEO, Ulf Carlzon, was quoted as saying, “Together with the new shareholders, we can continue developing our offer of full-service solutions within digital communication and biometric security access and control systems, thereby realising significant further potential to become a leading security company in Europe.”

– Another interesting item from Nasdaq this week: The company ran a story on its website noting the “nine stocks” that legendary investor Charles Brandes has bought over the last two quarters. Brandes, of course, has made a name over decades as a stalwart adherent to the value-based approach to investing. His name is sometimes mentioned along with Warren Buffett, another proponent of value investing. Both follow the investment philosophy of Benjamin Graham, the author of the value-based investing bible Security Analysis. Both Buffett and Brandes based their careers on this approach, which recommends ignoring short-term market trends and investing for the long-term in companies that have strong businesses. By searching out companies that have a “moat” around their business (that is, company’s with a business that can’t be easily copied because of, say, patents) investors can buy the stock and not worry it will retain their value over the long term. The approach has worked for Buffett and Brandes. In the case of Brandes his company Investment Partners has almost $30 billion under management. In 2007 he was ranked 165 on the Forbes 400 Richest Americans list. What stocks has he been interested in lately? According to the Nasdaq story, Aware Inc. The story analyzed additions to his portfolio through the first-quarter of 2017 and fourth-quarter of 2016 and found that, “During the fourth quarter, Brandes increased the holding by 14.54%, and increased it by 20.04% in the first quarter. The guru holds 0.1% of the company’s outstanding shares.” Apparently Brandes likes Aware. Recent management shifts that saw Richard Moberg resign as co-CEO and co-CFO and Kevin Russell take over as the single CEO and president surely helped the decision. Value investors are often suspicious of anomalous corporate situations such as “co-CEOs.”

– A financial media report noted that shares in JetBlue Airways have done well of late. The company’s shares have gained almost 14% over the last three months. The report went on to note that JetBlue is one of the first airlines to take an important step in business efficiency by collaborating with US Customs and Border Protection (CBP) to test a new, “… paperless and deviceless self-boarding process” that uses biometrics and facial recognition technology to verify customers at the gate during boarding. Nowhere is efficiency more important than in the airline industry where sky-high operating costs ensure the industry is “tippy” at best in terms of profits. Reducing the number of people needed to fill an airplane will lead to huge savings for airlines. According to a Bloomberg report JetBlue is to begin testing the biometric tech on flights from Boston to Aruba’s Queen Beatrix International Airport. The system consists of a custom-designed camera that takes a photo and transmits it, “… to U.S. authorities to compare against databases of passport, visa and immigration images. A display above the camera will notify travelers when they can board,” according to the report. The CTO of SITA was quoted as saying, “This is the first integration of biometric authorization by the CBP with an airline and may prove to be a solution that will be quick and easy to roll out across U.S. airports.”

– Another example of the big advances that can happen in corporate efficiency through the use of biometrics-like technology surfaced in China this week. Ant Financial, a subsidiary of Jack Ma’s Alibaba Group, announced an interesting advance in the use of image recognition software. The company Tuesday rolled out an “artificial intelligence-driven, image-recognition system” that will be used by insurance adjusters to automatically estimate damages to cars that have been in a collision. The process of estimating collision damage requires large amounts of human time and contributes to huge collision repair bills. By utilizing image recognition software the company is pioneering a huge efficiency gain in an industry that is massive. Millions of vehicle insurance claims are processed each year. All of those currently involve a human insurance adjuster. Moving to a digital system would make the, “… assessment of external vehicle damage more standardized and objective, reducing the potential for human claims adjusters on the scene to be influenced by the parties involved in the accident,” according to a report. “As technologies, including AI, security, computing infrastructure, blockchain and biometrics continue to evolve, we have the opportunity to work with our partners and collaboratively redefine a new technology infrastructure for financial services,” the CTO of Ant was quoted as saying. The launch of the system occurred the same day the well-respected magazine MIT Technology Review named Ant one of the “50 Smartest Companies of 2017.”

– Biometrics sensors are playing a really interesting role in the rapidly advancing automated vehicle (AV) sector. Over the last year and a half AVs have become a major business story. One of the biggest business stories of the last two years was an accident in Florida last summer. A tech executive driving a Tesla was allowing the cars self-driving functions to pilot the vehicle. The cars sensors didn’t pick up a white semi-trailer crossing in front of the car near sunset. The driver has since been written into history as the first human to die in an AV accident. Two weeks ago the National Transportation Safety Board (NTSB) wrapped up its investigation of the accident. The NTSB read the data from the vehicle’s system and found the driver was ignoring warnings from the car’s biometric-enabled Autosteer system. According to a report the car sensed the driver’s hands were not on the wheel and gave the driver a visual warning on “seven separate times that said ‘Hands Required Not Detected’. In six cases, the system then sounded a chime before it returned to ‘Hands Required Detected’ for one to three second periods.” The accident followed shortly after.

– Taking biometric sensing a step further will be AVs that have an iris scanner that monitors whether or not the driver is tired. The forthcoming 2018 Cadillac will also have advanced driver monitoring systems. If the car detects no response from the driver over a certain time the vehicle will assume the driver is having a heart attack and will safely pull the car over to the side of the road, put on the hazards and contact first responders.

– Another story from the world of AVs and biometrics this week: According to a local news report Dubai Police on Tuesday unveiled the world’s first, “… autonomous, self-driving miniature police car.” According to the report the robotic vehicles will be “…equipped with biometric software to scan for wanted criminals and undesirables who are suspected of, or are breaking laws.” The AV is described as being about the size of a child’s electric toy car. It has a drone on the back that can be launched to make airborne surveys. It will patrol, “…different areas of the city to boost security and hunt for unusual activity, all the while scanning crowds for potential persons of interest to police and known criminals.” A police source was quoted as saying, “It can recognise people in any area and identify suspicious objects and can track suspects.” The cars cannot be accessed except by officers using fingerprint scanners. The device is being deployed by a Singaporean firm, OTSAW Digital.

– UK voters famously voted to take themselves out of the European Union earlier this year. Will the so-called Brexit vote see the return of a plan to issue biometrics-based ID cards? Possibly. The Home Office is said to be working on a plan to issue ID cards to European Union citizens who choose to stay in the UK and acquire “settled status”. A plan to roll them out such cards was floated in 2006. When the Tories took office one of their very first acts was to deep-six the plan. Now, post-Brexit, the plan is back. Current PM Theresa May (a Tory) included the idea in a plan she introduced on “EU citizens’ rights” that was released this past week.

Contact us for the full list of the companies we are following or to suggest a company to follow.

Disclaimer: Stock recommendations and comments presented on BiometricUpdate.com are solely those of the analysts and experts quoted. They do not represent the opinions of BiometricUpdate.com on whether to buy, sell or hold shares of a particular stock. Investors should be cautious about any and all stock recommendations and should consider the source of any advice on stock selection. Various factors, including personal or corporate ownership, may influence or factor into an expert’s stock analysis or opinion. All investors are advised to conduct their own independent research into individual stocks before making a purchase decision. In addition, investors are advised that past stock performance is no guarantee of future price appreciation.

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About Jeff Sanford

Jeff Sanford has worked as a business journalist for more than fifteen years. He has held staff jobs at major commercial publications such as Canadian Business and National Post Business magazine. He has contributed to various Canadian, U.S. and UK-based publications. He has written about markets, economy, finance, energy, infrastructure, government policy and technology. He currently lives and works in the west-end Toronto neighbourhood of Parkdale.