1 AIM stock under 8p with huge potential upside!

Invest in London Alternative Investment Market (AIM) offered me the chance to pick up some exciting under-the-rader small-cap stocks. Corporate broker Cenkos thinks AIM shares should be considered tech unicorns (worth £1bn or greater). That would represent an upside of about 250% from its current value.

On a mission

The stock is based in Australia View the Machine (LSE: SEE), which is trying to reduce the number of road accidents. This figure is now more than 1.3m per year, worldwide. A significant proportion of these accidents are due to driver fatigue or distraction.

The company’s AI-powered driver monitoring system (DMS) is installed in vehicles and aircraft to detect drowsiness in human drivers and pilots. By the end of June last year, there were more than 447,000 cars on the road activated with DMS technology. And the company says it has detected more than 3.6m fatigue and distraction-related driver events so far.

The company’s Guardian technology has been used in commercial truck and bus fleets around the world since 2016. The system monitors the driver’s facial position and eye movements to determine whether they are alert and looking at the windshield. If the system detects that the driver is not alert, an alert will sound or the interior lights will flash. It can even apply the brakes if the driver doesn’t respond.

Opportunity

Guardian has been used in 26 countries. It is connected to a 24/7 monitoring center in the cloud that allows fleet owners customizable intervention and analytics options.

By 2030, it will be mandatory to include DMS technology in all new cars in the US, EU, and China. This creates a huge opportunity.

Back in October, the company signed an agreement with an auto parts supplier Magna International to mount a camera on the rearview mirror to monitor the driver and passengers.

And just today, Seeing Machines announced a non-exclusive distribution agreement with Mobileye. Under the agreement, Guardian will integrate Mobileye’s advanced driver assistance system to alert drivers to various potentially dangerous situations. The companies will jointly market their combined offering to transportation and logistics customers around the world.

Savings and finance

At 7p a share, the company now has a market capitalization of £290m. The stock is down 21% in the past year.

This lackluster performance is probably related to the company – which reports in Australian dollars (A$) – posting widening losses. For the full year to June 2022, A’s revenue was $54.4m. This is a year-on-year growth of 15%, despite the supple chain problem. However, losses for the period rose to A$25.3m, a 45% increase over 2021.

This gives the stock a price-to-sales (P/S) ratio of around nine, which is very expensive. The company will not be profitable for several more years. So one risk is shareholder dilution as it generates more cash. Otherwise, it will have to carefully manage its cash position of A$59m (by June 2022).

Overall, I like the long-term market opportunity here, especially as DMS becomes a mandatory safety feature on all vehicles. But I won’t add to my small position in the stock until I see evidence of re-sales accelerating and losses narrowing.