This Penny Stock is “Wrapped” In Potential

Hey Trader,

Jason Bond here. I’m rolling out a new series where I pick my favorite stocks right now under $5. That’s right – a stock you could buy for less than a latte.

And without further ado, for my first issue, I’m looking at Wrap Technologies (NASDAQ:WRAP) which is a company that has been known to really catch fire when public unrest or riots are on the minds of traders. For example, as we recently saw following the Roe v Wade decision the stock moved over 30% in just a couple of hours on that day and news outlets took notice:

No matter which way you look at it, there’s an issue plaguing law enforcement technology in the United States. In 2021, the ten cities with the largest police departments paid out a staggering $1.02 billion in settlements and court judgments in police misconduct cases. The average cost per day of arrests in New York City is north of $1 million. That’s an expensive pair of handcuffs.

Here is something else I found interesting.  The average payout for litigation and insurance for cases alleging misconduct by 20 large cities is over $12M per case!  Police departments, insurance providers, and yes you and I – the taxpayers – are all paying this price!

Now, imagine if they were using non-lethal measures instead…

That’s why I’m so bullish on Wrap Technologies (WRAP). This tiny, roughly $77M penny stock with, in my opinion, massive potential upside, developed a revolutionary technology that will significantly cut these unnecessary costs of policing.

Here’s how it works. Wrap Technologies Inc. has developed the BolaWrap 150: “a handheld remote restraint device that deploys a 7.5-foot Kevlar cord that can wrap around an individual … at an effective range of 10-25 feet.”[1]

You can think of this device as “remote handcuffs” – designed to de-escalate situations in a safe manner. For more information on how the device works, check out their investor presentation here.

And here is an image of the device itself.

The picture above is what one of the reloadable cassettes looks like. As you can see, the device is simple and not too bulky. This is important so that security personnel can use it easily.

Not only that, but I love the recurring revenue from selling new cartridges. After all, the classic razor/razor blade model is one of the most profitable around.

Now here’s why I like the stock so much right now:

In the Sweet Spot

WRAP’s stock is currently trading around $2.07 a share. It hit an all-time high of $14.40 back in July of 2020. Finviz reports 40.91M shares outstanding, with 13.7% held by institutions – something we love to see with penny stocks as it aligns big money’s interests with ours.

For a small company, they are very well-capitalized with nearly $.92 cash / share – derisking this play even further.

And unsurprising given the market it serves, revenue has nearly doubled over the last four quarters from $1.5M per quarter to $2.5M at the end of Q4 2021.

I think it makes sense that revenues will continue this upward trajectory as litigation costs continue to cripple police departments nationwide. They need a different solution. WRAP offers this pivot.

Indeed, BolaWrap already has 600+ partnerships with police departments across the US and has devices in 51 countries.  This is an incredible “moat” around the company that will be hard to penetrate.  This is not a “pie in the sky” idea or company. It is real and has literal “boots on the ground” right now.

The non-lethal weapon market grew up to $9 billion in 2021, with projections reaching $16.1 billion by 2027. That’s almost a double over the next five years.

By combining the current 12 million+ global police officers, 75 million global military personnel, and 20 million private security workers worldwide, Wrap Technologies Inc. projects a Total Addressable Market (TAM) of over 105 million use cases.

That’s why we see shares with as much as 10x potential upside from current levels. Buy now – emergency personnel certainly are.

My gameplan: I want to buy Wrap Technologies (WRAP) up to $5 per share.

That means I do not buy shares of WRAP if they are trading for more than $5 per share, I would like to sell above that level.

X

[1] https://wrap.com/wp-content/uploads/2022/03/Investor-Relations-Presentation-Deck-Mar-2022.pdf

[2]  https://finance.yahoo.com/quote/WRAP/key-statistics?p=WRAP