Wrap Technologies' New AI Tech Could Be a Game-Changer
By Aaron James
CEO, Banyan Hill, Money & Markets
Banyan Nation,
I want to share an update on Wrap Technologies (Nasdaq: WRAP), an early-stage stock that I wrote about at the start of the year.
In first-quarter 2024, its shares ended down 17%. There’s been a steady decline in recent weeks.
Over one hundred members of the Banyan Hill family wrote in to tell me that they bought shares in this stock.
No doubt you’re feeling some pain and frustration with WRAP’s performance…
I am too.
But looking at the facts, I’m not worried about the move at all.
As a small-cap stock, I expect WRAP to have some volatility.
In the first quarter of 2024, an average of 637,000 shares were traded daily. At a price of about $2.20, that means only $1.5 million in value changed hands.
Wrap is one of the smallest companies I own, so I expect it to be one of the most volatile.
Many great companies will see pullbacks, and often much larger ones on the road to life-changing returns.
For instance, Apple (Nasdaq: AAPL) was one of the best-performing stocks in the 2010s. But at one point in 2012, shares dropped 40% from their highs.
Part of the joy of investing in smaller companies is watching them grow and seeing their business plans play out over time. But it can take years, and shares won’t move up in a straight line.
In the meantime, Wrap Technologies announced in February that it’s expanding its manufacturing operations in Tempe, Arizona.
And it’s taking on a new CEO, Scot Cohen.
Cohen is both a co-founder of the company and its largest single shareholder. He’s been instrumental in getting Wrap the financing it has needed to expand operations.
That’s a good sign for a growing company. A CEO who does a great job starting a business may not be the right leader to turn it into a much larger company.
All of those are bullish signs … and signs of growing pains.
Here’s the most exciting part:
On April 1, Wrap launched its AI product suite under the “WrapAI” name.
These products utilize machine learning algorithms to automatically identify people, objects and activities in video content.
This can massively streamline the process of tagging video footage for analysis and reduce the total amount of video footage saved.
That translates into less time being spent by police departments and less equipment needed. This combination of labor and cost-saving measures could be huge. And no other company is there yet.
And as Wrap ramps up production in today’s AI and automation-driven era, it’ll likely figure out further ways to improve output without increasing headcount.
So, we have signs of a company improving its operations. But at the same time, its share price has gone lower. That’s a mixed signal!
Bottom line … I’ve been a buyer of shares on multiple occasions. I’ve had a chance to hear the company’s story and growth trajectory, and speak with the founder.
Full transparency: I still like the company. And I’ll continue to hold my position.
If Wrap’s operations change materially, I’ll let you know before I make any changes to my portfolio.
For now, I’ll give the new CEO some time to implement some changes that can hopefully build on Wrap’s growing production and sales.
Yes, I’m feeling the pain from the recent share drop, just as you are now.
But I know in time, Wrap’s growing business will make up for it…
It has an innovative product that’s far safer and less lethal than today’s alternatives. And it’s just scratching the surface of the potential market.
Just remember, small-cap opportunities like Wrap should be a small part of your portfolio dedicated to speculative investments.
Small companies can make wild moves, and Wrap is no exception. In time, patience offers the best rewards.
Aaron James
CEO, Banyan Hill, Money & Markets
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