Artificial intelligence, quantum computing and crypto. Those three industries have been all the rave in the small cap tech stock world over the last several months. Our readers have participated in some of those gains, namely with our bullish call on Blockmate Ventures Inc. (MATE.V)(MATEF). MATE remains a focus of ours and we think that the recent pullback represents a strong buying opportunity. Especially as the development milestones for Hivello remain on track and the node count is nearing 30,000. At this pace, the goal of 100,000 nodes by the end of the year should easily be surpassed. We remain bullish with a $0.50 target for the near-term and longer term $5.00 target when Hivello eventually hits 1 million users. However, we are going to shift gears to focus on another Canadian tech stock. One in the augmented reality industry, an overlooked sector despite being a cousin to AI. One that just signed a $10 million contract, blowing away revenue numbers put up by junior companies in typical "hot" sectors. That company is ImagineAR Inc. (IP.CN) (IPNFF). If you like our picks you can follow this blog by clicking the follow button on the top of the left hand panel. We have 1031 followers on here as well as 121 followers on our Canadian blog. You can also follow us on X @StockTradePicks which has over 5,000 followers.
ImagineAR is a name that we are familiar with. The company first got on our radar back in 2022 when it signed a deal with the Baltimore Ravens of the NFL to deliver mobile augmented reality fan experiences. That deal, along with a few others have so far turned out to be not as lucrative as first hoped, and the listing has been one of many Canadian junior tech stocks in the graveyard since the 2021 COVID boom went bust. However, today's announcement is truly impressive and blows everything the company has done to this point out of the water. IP closed at $0.11 on Monday while it touched over $0.60 in March and April of 2021. The news released today lays the ground work to make those losses back and then some:
Vancouver, British Columbia--(Newsfile Corp. - February 24, 2025) - ImagineAR (CSE: IP) (OTCQB: IPNFF) (FSE: GMS1) an Augmented Reality company that enables organizations, brands and businesses to create their own immersive experiences, announced today the execution of a Design and Project Installation Agreement by its wholly-owned subsidiary FameDays to develop a 25,000-square-foot immersive experience center in Niagara Falls, Ontario. The $10 million agreement, executed with Ontario real estate developer Mr. J Grewal through his holding company on February 21, 2025, will include immersive attractions, AR racing, VR Gaming, Mixed Reality among other attractions. This marks the first implementation of ImagineAR's newly announced AR-AI (Augmented Reality-Artificial Intelligence Integrated Revenue) business model, designed to drive scalable, recurring revenue.
Strategic Location: Niagara Falls' Tourism Powerhouse
Niagara Falls attracts over 13 million visitors annually, making it one of North America's most iconic tourist destinations. The immersive center intends to capitalize on this foot traffic, positioning ImagineAR's technology at the intersection of entertainment, education, and next-gen tourism. The location ensures access to a global audience and enhancing visibility for both parties.
2025 Rollout
The Niagara Falls center is the first immersive AR /AI installations slated for 2025. The partnership serves as a blueprint for scaling ImagineAR's technology across high-traffic global destinations, from theme parks to cultural landmarks.
Mr. J Grewal added "An immersive center inside a hotel transforms the guest experience from a simple stay to a journey of discovery, blending technology, culture, and entertainment seamlessly. In Canada, where travelers seek both adventure and authenticity, this innovation allows hotels to offer curated, interactive experiences that not only enhances guest satisfaction but also drives longer stays and repeat visits, making it the future of hospitality. We have already expressed interest to open two more locations, and we are currently in discussions to open our 2nd immersive center in Ontario with much larger square footage."
Alen Paul Silverrstieen, CEO of ImagineAR, stated "This partnership is a transformative milestone. Niagara Falls' tourist base provides the ideal stage to showcase how AR/AI can redefine experiential entertainment. By signing a $10 million contract and a separate agreement securing recurring revenue for our software installation, this accelerates adoption of our AR-AI model. This is just the beginning of our vision to make immersive AR/AI a staple of global tourism."
IP has 277 million shares outstanding with a market cap of approximately $30 million at Monday's $0.11 close. This $10 million contract that by all indications appears to be the tip of the iceberg means IP is trading at just 3x revenue of this one announcement. For longer term investors who may be frustrated with the company's past deals not being as lucrative as hoped, understand that this is different. First off, a $250,000 deposit was already received by IP. More cash received as a deposit than most of their past deals turned out to be in revenue. Second, this is a 25,000 sq ft attraction in one of the largest tourist destinations in the world and appears to be part of a hotel. This is not some obscure AR project on mobile devices that can be dropped at any time with little risk or cost to the client. Grewal is allocating a 25,000 sq ft location for this project, which means the capital already invested and to be invested for the entire project will exceed the $10 million contract with IP. Grewal is betting a fair amount of money and reputation to see this one through. Third, this tourist attraction will be a demonstration and free advertising of IP's technological capabilities to a wide audience. This is a massive step up from the mobile phone experience of the Ravens and similar deals. Almost certainly it will gain mainstream media attention as well as be included in Niagara Falls tourist brochures promoted by industry and government agencies. This is the type of deal that can turn a penny stock start up into a legitimate business. MATE must build up Hivello over time to attain critical mass and mainstream acceptance. There is a chance that IP gets there simply by executing on this deal.
While the news today alone puts IP at a compelling valuation, the company is actively engaged in a patent infringement case that could result in an upside that is multiples of its current level even before considering revenue opportunities. A few months ago, the company filed a patent infringement suit against Niantic, the publisher of the Pokemon GO mobile game. The case relates to Patent No. 8,777,746 and infringements on character gameplay and touch reactions with the Pokeman GO game, among others. IP has retained global law firm Greenberg Traurig, LLP as its partner in defending the company's intellectual property. GT Law wouldn't take this case if it did not think that it had a good chance of success. While David vs Goliath cases are usually long shots as the smaller plaintiff cannot compete with the legal power and pockets of the larger defendant, a contingency fee arrangement with GT Law means that IP will be able to see the end result of the legal outcome.
Niantic is in talks to sell its gaming division for $3.5 billion to Scopely, a mobile game company that was purchased by a division of Saudi Arabia’s Public Investment Fund. With IP signing a deal as part of a major tourist attraction, its patent case is strengthened as it can no longer be considered a patent troll. These two events occurring during this patent case could not be better timed. Rather than taking an adversarial approach, this may be an opportunity for IP to showcase the technology at a wider scale to the Saudi fund. Saudi Arabia is smartly looking to diversify its economy from being merely a petrostate. If it's aggressively buying into gaming, larger immersive tourist attractions are likely also on the table. Particularly since its neighbor UAE is known for garish tourist attractions that mask over an otherwise conservative society. IP's technology can be equally applied to Halal experiences as it can to places like Niagara Falls.
Legal cases can be long and complex drawn out processes. Penny stock investors tend to not have the level of patience required to see a court case through to the end. However, if IP continues to announce revenue-generating deals such as the one today, that will drive interest in the company's day-to-day operations while the court case goes on in the background as a "cherry on top". Keep in mind that Niantic raised funds at a $9 billion valuation back in 2021. The fact that management is willing to talk M&A at a substantially lower valuation than four years ago shows that it feels that the multiple lawsuits against it may be resolved with substantial payouts that it wants to make someone else's problem, including the patent infringement case with IP. Which, in our opinion, appears to be the most serious of the group:
IP's long-term valuation at this stage is a complete wild card. However, we have enough information to at least come up with a reasonably attainable near-term target with some financial basis. One that should ensure strong upside for our readers and purchasers of the stock under $0.20. Then after that it's up to individual investors to figure out when and where they want to take profits.
When coming up with our targets on MATE, we assumed an 8x revenue multiple. It's difficult to find an AR pureplay as most companies that lead the sector like Microsoft obviously cover a wide range of much more mature sectors. However, AI company C3.ai, Inc. (AI) has a revenue multiple of 10x. With this in mind, we think that an 8x revenue multiple is fair.
$10 million in revenue should reasonably be achieved within a year based on the timelines outlined in the press release. There is also an annual fee and monthly royalties, though there is no indication how lucrative these will be in comparison to the $10 million upfront payment. Grewal mentioned the opening of at least two more locations, with one in active discussions and with a larger footprint. This potential contract will likely be for at least $10 million given its larger scope, but also has a lesser chance of completion given its early stage. So we are going to apply a 50% discount to this second $10 million, for a total of $15 million in revenue between the two locations. Applying an 8x multiple leads to a $120 million valuation. On a per share basis, this leads to a target of $0.43.
IP's value is less clear over the longer term. Given this contract, the potential to greatly expand this relationship with Grewal, the potential to attain other contracts similar in nature as well as any potential payout from the lawsuit, we think a $500 million valuation is within reach. There are 56 million warrants outstanding so we expect the fully diluted share count to be 333 million when they are exercised. This leads to a long-term price target of $1.50 per share.
We will continue to monitor the stock closely and increase the targets if and when the situation merits it. Based on the tone of the news release, we think that future releases will show greater clarity and expanded revenue opportunities. For now, we think anything under $0.20 should provide investors with near-term upside. However, nothing is guaranteed. Either way, we suggest readers to watch the stock closely tomorrow. It may be the most interesting and volatile play in Canada.
Disclosure: We are long IP.CN
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