FLYLF - FLYHT Aerospace: 2 Incoming Monopolies Practically Free

2024-04-08 05:25:59 ET

Summary

• FLYHT's legacy business is currently unprofitable but undervalued, with potential for a higher price-to-sales ratio.
• The company has two new growth opportunities in areas where it could have a monopoly, which could lead to profitability much faster.
• FLYLF stock price undervalues the legacy business and offers significant upside potential with the new growth opportunities.

Thesis

The legacy business is currently unprofitable but is arguably cheap. The price-to-sales ratio is around 1, despite half their revenue being high-margin, ultra-sticky, steadily growing SaaS. I argue this SaaS revenue should have a much higher multiple, at least 3, if not more. Thus I believe the overall price-to-sales ratio should be at least double what it is today. I believe that by the time the legacy business turns profitable, which I expect would likely happen in late 2025, this repricing would likely occur.

However, I expect the overall business to turn profitable much faster, perhaps this year, thanks to two new growth opportunities in areas I believe FLYHT could have a monopoly. The prospects for these growth opportunities dwarf the core business. While it is hard to estimate just how well and quickly they will land with these products, I believe by the end of 2025, FLYHT's annualised 4Q2025 operational profits would be in the region of $3m-14m (that's around $0.08-0.35 EPS considering 40M shares outstanding)....

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