Why Did Energous Stock Drop 8% Today?

What happened

Small-cap tech stock Energous Corporation (NASDAQ: WATT)  had kind of an interesting day today — and by “interesting,” I mean bad.

Demonstrating its WattUp “wireless charging 2.0” technology for charging electronic devices without need for a point of contact (much less a plug) at the Mobile World Congress Barcelona today, Energous also announced a partnership with Chinese smartphone maker vivo Global to “explore integrating WattUp into smartphone designs that charge wirelessly over-the-air.”

Energous stock responded by dropping more than 8%, closing the day down 8.2%.

Cartoon characters confused by declining stock chart.

 Image source: Getty Images.

So what

Why might that be? After all, aren’t partnerships — and potential sales of products to a partner — a good thing for Energous and its WattUp invention?

You’d think so, right? But I can’t help but wonder if by tooting its horn in this way, Energous got investors just excited enough about its prospects to take a closer look at its business. Upon doing so, they might have noticed that Energous, valued at $261 million, has no profits (and therefore no P/E), no free cash flow , and hardly even any sales to speak of — less than $500,000 over the last 12 months.

Now what

Energous has its work cut out for itself, convincing investors that a small-cap tech stock selling for more than 500 times sales is a good investment. Inking a partnership with a top 10 global smartphone supplier is a good first step. A better step would be “beating earnings” and giving great guidance when i t report s its Q4 results on Wednesday. That could be difficult, however. Analysts are looking for Energous to report sales of $790,000 for the quarter — which is more revenue than the company collected in the entire four quarters preceding Q4, combined.

Fingers crossed.

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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Referenced Symbols: WATT

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