RELL is a micro-cap that has greatly under-appreciated optionality, and represents a highly asymmetric way to play some of the hottest themes in the market: grid, ESS, and semis (LCRX one of their largest customers).
https://preview.redd.it/b3agoa7dg7gg1.png?width=1187&format=png&auto=webp&s=9cba0f1df21ddbbb75fff6041d2de9a5e637ff0f
RELL makes a number of components that are surprisingly crucial to a number of industries. For example, their ultracapacitors are found in \~40,000 wind turbines, and they are the primary supplier of magnetrons used in synthetic diamond machinery.
The problem has been that their legacy products are vacuum tubes, which accounts for the majority of their revenue.
What's changed is their ESS segment has seen 39% yoy growth, and they are seeking to move from largely producing ESS components to ESS solutions.
https://preview.redd.it/t7gr31qeg7gg1.png?width=697&format=png&auto=webp&s=06a971e803aa84435e1cce5713b429aeca3a950f
They are well on their way to being a ESS solution provider. AI energy hype has increasingly shifted form energy sources to batteries as the most practical way to increase power available to AI centers. Hence, nearly all ESS companies are trading at mania multiples and continue to go parabolic. RELL recently complete an expansion in Illinois and a new design center in Texas to accelerate the manufacturing of made-in-USA battery ESSs.
This seems like a slam dunk. They have the history of creating industry critical electrical components for many years. They have the capacity to build these ESS systems. And the demand is there. I really see no reason why this would not come to fruition and represent a radical transformation of the company.
https://preview.redd.it/dku6o5zhg7gg1.png?width=680&format=png&auto=webp&s=e4be35a790e1b2482fdfc0782cc2133935b2326c
If that is not sufficient to get you excited consider the relationship to LRCX I can't say it any better than this, so not gonna try. LRCX beat and raised. Lam did not pop off on the report - given that it's at 15x perhaps it is priced in. If you read through to $RELL through - trading at less than 1x - perhaps there is something here.
https://preview.redd.it/tkis1aymg7gg1.png?width=795&format=png&auto=webp&s=aa5f4304fd739583b1f7e259771a217ccd8733a0
https://preview.redd.it/gd5mwznng7gg1.png?width=750&format=png&auto=webp&s=ebbb2ddc221cde3c6fbc2fb61f928f87bca86bff
What gets my juices flowing is how very little this needs to re-rerate compared to its peers in order for this to be an incredibly good options trade. It could re-rate to around 2x-3x sales (which would still be the lowest of ESS companies by a long shot) and there are strikes that would offer 10-20x returns. A trade where you can get that kind of returns for a such a modest reconsideration of a small cap - you can't find that at this stage of the market.