Cyberdyne (7779): Moving Towards an Inflection Point

Going back some eighteen months, when issuing “short sell” reports was all the rage in Japan, a favourite stock to target was Cyberdyne, which at that time was trading on a Price : Sales ratio of 400x. In response, PSA made a case for Cyberdyne being a “sell” or an “avoid”, but noted that a short-sell recommendation is a different matter altogether, involving as it does (1) the reader proactively positioning in the stock; and (2) requiring an endgame that triggers position unwinding. Such an endgame however, usually means at least one of bankruptcy / recapitalization / massive writedowns / fraud exposure / collapsing business performance – none of which look like applying to Cyberdyne. Considering the various start-up companies involved in bionics (or cybernic, as Cyberdyne refers to it), our view was that Cyberdyne was the one that made the least attractive short-sell opportunity; in our view all the others were considerably more likely to go bankrupt / recapitalize, whereas Cyberdyne’s huge cash position made it extremely secure. By extension, if a stock is not a “short sell”, then at some point it must become a “buy”.  
We think that Cyberdyne is moving closer to that inflection point at which you stop looking at the level of business the firm is doing today (insufficient) and look instead at the potential size of the markets its products can address. Given that the new products have probably been launched too late to drive the December quarter results, probably the release of the March quarter results in May 2018 should see that changeover.