March 15, 2022 -- InvestorsHub NewsWire -- via pennymillions --



  • iQSTEL is very close to achieving profitability.
  • iQSTEL’s telecom revenue is growing rapidly and gross margins are improving.
  • iQSTEL’s higher margin technology products are nearing fruition.
  • I see the current fair market value at $1.07.

iQSTEL (OTCQX:OTCQB:IQST) is a microcap holding company that I have covered here at Seeking Alpha. The company’s primary revenue stream comes from its telecom operations. But iQSTEL also has, or is working on, several innovative technology products such as Blockchain, Electric Vehicle (EV), EV batteries, Fintech services, and Internet of Things [IOT] smart devices.

In my last article I rated iQSTEL as a “Speculative Buy” and I saw a fair market value of $.71 for the telecom business alone. Since then, the stock has reached over $1.00, before drifting back to prices near where they were before. No new financial results have been filed yet since Q3 21 and those results are not expected until the 10-K is released, presumably after March 31 of this year. But the company has provided several updates, and I believe the company is stronger since I wrote about it last. I see the dip in price as only adding support to the speculative buy opinion. I see a current fair market value of $1.07.

Financial Recap

I covered some key financial points in my previous article that I will include here as a re-cap. To begin, iQSTEL’s net income showed improvement with substantial gains three quarters in a row. The loss in Q3 21 was negligible at just over $100,000, and the trend clearly points to a reasonable path towards profitability. See graph below.

Shareholder equity held well in that it dropped just a bit less than the small amount of negative net income. The company maintained a positive balance of total assets to total liabilities.



Cash decreased by about 66% during the third quarter to approximately $1.2 million, likely in part due to the small negative net income. The current cash position appeared to provide enough to finish out the year, even if the company’s net income did not improve.

iQSTEL decreased its general and administration expenses slightly year-over-year and continued to see the benefit of becoming “debt-free” of toxic debts such as convertible notes and warrants. Interest expenses were less than 1% of 2020’s Q3 at $6,802 for Q3 21 vs $913,592 for Q3 20.

Telecom gross margins showed much needed improvement but needs to show further improvement to really bring in profitability. This is especially true for what I label “SMS Austin” when looking at the breakdown. SMS Austin is the largest contributor to revenue but has a low gross margin performance at just 3.06%. SMS Austin is the newest of their telecom business, and company guidance in general is that it takes some time for new telecom business to grow margins. It will be interesting to see if margins improved in Q4, and now even into Q1 of 2022 as small % gains in gross margins on large blocks of revenue can make an enormous difference to net income.

Improvements to financials were validated as iQSTEL moved up the OTC ladder of tiers in 2021. iQSTEL advanced to the OTCQB level earlier in the year, and quickly was upgraded again later to the OTCQX level. OTCQX is the highest level available in the OTC, and it is only available to companies that meet their financial requirements.

Recent Developments

In my prior article I included a graph that showed iQSTEL’s revenue gains since 2017. The graph included the company’s then FY 21 revenue forecast of $60.5 million. Since that time iQSTEL informed that full year 2021 revenue will be reported at, or very near, $64 million, or about a 6% upgrade in that short timeframe. The company has also added that their revenue projection for FY 22 is $90 million. See graph below.



With 2021 completed iQSTEL has an impressive (projected) 70.86% revenue CAGR since 2017. If you add forecasted data for 2022 the CAGR is 64.33%. And it’s worth noting that iQSTEL has a history of forecasting below actuals. A lot of revenue has been added since 2017, but even the expected growth rate from 2021 to 2022 is projected at 40.63%.

M&A activity could increase the 2022 projected revenue amount, and iQSTEL just recently advised that they are currently drafting two separate acquisition agreements for which they expect to close on soon. Clarification was included that each acquisition is expected to augment the telecom projection of $80 million revenue for 2022. Note that the other $10 million in the forecast to make $90 million is what is projected, thus far, to non-telecom business.

iQSTEL has indicated that it plans to fund M&A activity with investment from a banking firm. No specific details on a name of a firm, or definitive closure information has yet been provided. But the company last reported work on a $60 million deal to fund growth objectives over the next three years.

Information on iQSTEL’s non-telecom divisions has been provided, but again not in a lot of detail yet. The company has shared photos and other information regarding its EV motorcycle. It appears that a small number, maybe over 10, motorcycles have been manufactured to specifications. Shipments from that batch were sent to the U.S., Panama, Venezuela, and Spain. The unit sent to Miami, Florida is being tested presumably as among the final steps prior to full scale production and sales. iQSTEL plans to provide more details soon, but they have disclosed that Panama was selected as a regional distribution center for Latin America, as Panama is well suited to serve in that purpose. Of course, Panama is a major shipping center with the Panama Canal.


iQSTEL announced that they won the 2022 IoT Breakthrough Award for the second year running for “Smart Appliance Product of the Year”. This is a noteworthy award as other category winners and participants include names of large or notable companies such as Bosch, GE, Apple, Lenovo, Tile, Ring, Cisco, and Nvidia. Last year iQSTEL won this award for their IoT Smart Tank product. They were awarded this year for their IoT Smart Gas product.

iQSTEL advised recently that their IoT Smart Tank product, that was sold to an unnamed Fortune 500 Company, is deployed, and operating with the planned 2,500 units. These units should be providing monthly recurring revenue according to prior information from the company. I assume that a big corporation like this would have many, many more tanks available to furnish the product. There is no word of expansion yet, but I believe that it seems reasonable that the customer would want to use the product for several months or so before deciding to do a full rollout. If for no other reason, perhaps just to see if any changes or upgrades to the product are needed before making the larger investment.

I’m not sure if or when they will name the Fortune 500 company, but iQSTEL did advise that they see potential to sell the product to 8 to 9 other big corporations. They further advised that they see the same potential for 8 to 9 big corporations to target for their IoT Smart Gas device. I assume there could be many other small or regional companies to target as well.

It’s hard to say this early just how well these products may perform for iQSTEL or how many companies may choose the products. I would think that if the first big company likes it then that could speak well for gaining other big customers. Sometimes a first established leader in the product category looks like the one to go with. Also, it may help to keep in mind that each of these iQSTEL products are award winners from a major IoT competition. That alone is selling point, implying a superior level of utility, and one that may create a perception of the product being “the best”.

iQSTEL’s Blockchain offering “MNPA” has not been covered a lot by the company in recent months. This product allows mobile phone users to easily retain their existing phone number when switching providers. I have not seen any data on sales, but it may be possible that the product was not as ready as they first thought. A recent announcement advised that “MNPA version 2” will be released soon. It’s unclear to me if MNPA has already had some sales and getting upgraded, or if the version 2 was needed for rollout. I assume more information is forthcoming. Also, iQSTEL added that the same engineers are working on a new project with global reach for SoHo and Medium shops that includes Token and NFT’s.

iQSTEL’s Fintech service offerings have apparently needed some extra work to be ready. The recent guidance is that the Mastercard debit card, U.S. Bank account, and mobile app/website will be launched in March of 2022. I would think they would like to get this product started very soon as it fits in with their plans to provide a means to facilitate iQSTEL’s EV product sales. The Fintech product is marketed as “Global Money One”.



As I mentioned, iQSTEL’s primary revenue stream comes from its telecom business. Their technology divisions contributed to revenue in FY 21 but up through Q3 21 there is not much information from the company in the way of a breakout of divisions. For example, the company stated that the IoT Smart Tank devices were already delivering on revenue, but no amount was provided.

With the unofficial FY 21 total revenue of $64 million, we can assume the greatest part of it is telecom, as the technology products are just coming to fruition. I noted that gross margins had improved as of Q3 21, and the overall telecom margin was 5.09%. I also mentioned that small improvements in gross margins, applied to millions in revenue can quicky contribute to net income.

According to Aswath Damodaran the average telecom-services gross margin is currently 20.75%. I assume that is a range we should expect iQSTEL to aspire to reach. If iQSTEL reached the average and it was applied to $64 million in revenue, then that would generate over $10 million extra available towards net income. Disregarding other expenses, such as taxes, that could amount to about $.07 in EPS. If you consider an average telecom-services trailing P/E of 37.30, then that $.07 could add $2.61 to iQSTEL’s share value based on its current margin.

Achieving a gross margin comparable to the industry average could take a little while, as iQSTEL is some distance away from that now. But the company has merged its telecom operations under one banner, and they advise that they see synergies and are making improvements to margins. The takeaway is that any improvement in gross margins puts them closer to profitability, or if profitability is achieved then better margins will add to it. Also, a 20.75% margin is a reasonable goal, as it is an industry average. The idea is supported when considering that certain of iQSTEL’s more mature telecom operations like SMS Miami and Swisslink achieved gross margins from 16% to over 19% in Q3 21.

On a price to sales basis we can look at the industry average telecom-services price to sales ratio of 1.27, and apply that to iQSTEL’s sales of $64 million. iQSTEL’s outstanding share count is 147,357,358. Using the average price to sales ratio and FY 21 forecasted sales the market cap could be $81.2 million, and the fair value for shares based on telecom could be $.55. That is just a little over today’s share price of $.485. That valuation may help explain the current market price, but it overlooks key points which are the rest of iQSTEL’s business divisions, and the current size of the company.

iQSTEL provided FY 22 guidance late in 2021. The projected revenue for 2022 included a gain from $64 million to $80 million in telecom revenue. In addition, iQSTEL provided its first projection for its non-telecom services, with a $10 million forecast. Altogether iQSTEL is forecasting $90 million in revenue for FY 22. An interesting development though is that January sales are reported at $6.7 million, and the guidance is to expect comparable results for February and March. When you annualize $6.7 million you can see that iQSTEL is already an $80 million revenue company. While revenue can fluctuate, iQSTEL’s typical pattern is to grow quarterly sales as seen in the graph below (including my Q4 21 and Q1 22 estimates).

If you apply the average price to sales ratio to $80 million in (presumed) telecom sales, you can see a fair value for telecom at $.69. The other $10 million in sales could be a mix of Fintech and Technology, but with technology products either already in use or about to be, I will apply a CSI Market technology price to sales ratio of 5.56x to the $10 million. That brings another $.38 in fair value.


It is not clear to me if the current revenue gains are owed partly to the Smart Biz acquisition that was thought that it would be completed in January. I have not seen a definitive confirmation. If it does support the gain its still just as valid, and if Smart Biz is not added in yet then it could mean just more revenue to come. As mentioned, two acquisitions are expected to close soon and both of those are expected to add more to the projected $80 million revenue forecast. Also, it is reasonable that January sales could have grown organically, as iQSTEL advised that they would be cross selling products amongst their telecom offerings.

Markets are inefficient and they do what they do. I believe the current market share price is just about right when only considering last year’s sales, and if you totally disregard everything the company is doing that is not in telecom. That may even be fair for 2021, as non-telecom business was not much a factor in revenue.

The share price did rise and pull back though. Currently it has been consolidating around the $.50 level. But the company is already bigger than it was in 2021, and per guidance, their technology and Fintech products are ready for imminent rollout. I see the current fair market value at $1.07 ($.69 + $.38).


The company provides a full list of risks in its annual filing. I recommend reading that in its entirety, but I will add a few notes.

I would reevaluate my investment thesis for iQSTEL if there was significant loss of business, failure to achieve profitability in a reasonable timeframe, and failure to achieve better margins. I would also reevaluate my thesis if I saw significant dilution occurring that does not bring in equal or better value to the company. For an investment in iQSTEL, I expect shareholder equity to continue to improve over time. At this point I believe the company has made steps in the right direction regarding these issues.

Final Thoughts

iQSTEL has shown determination for at least several months to up list their stock into Nasdaq. They added independent board members, cleaned up their balance sheet of all toxic debts and warrants, and they have demonstrated a record of gains toward profitability.

Their up list in OTC tiers was both a sign of strength to qualify and an effort to reach more investors to help meet what is the only remaining criteria to achieve to list on Nasdaq, which is, the minimum bid price qualification.

iQSTEL has continued to contend that they expect to reach all Nasdaq qualifications, including minimum bid requirements through organic growth efforts. They expect this to be accomplished in the first half of 2022. The company did raise $2.75 million from equity near the end of 2021, but this was toward meeting the equity requirements for Nasdaq, and perhaps this is another sign that they are so close to being ready.

My current fair value at $1.07 is based on what I can see today. It can be easily and justifiably raised substantially with more positive results including their achieving profitability. I already mentioned that telecom alone could raise the fair value of the stock with industry average margins. I could see that setting conditions for over $3.00 in value just for the existing telecom revenue alone, and it continues to grow. Even the 70% or so CAGR revenue growth could warrant a much higher P/E, one well above the industry average.

Also, the EV, IoT device, and Fintech divisions can bring substantial more value. A large rollout of Smart Tank devices or a popular customer response to the EV motorcycle could involve substantial revenue forecast upgrades, and those are high margin products.

iQSTEL recently expressed a goal of reaching a $1 billion valuation and beyond. Most companies have dreams, but iQSTEL has grown from a company with under $10 million in revenue in 2017 to pushing $100 million in revenue by 2022. They may even make it there, $90 million is just a forecast and they have over-delivered in recent years. If they have their M&A funding in hand and reach profitability then the potential is there for an even more rapid growth phase, and maybe a chance at those valuation goals. The current price to sales multiple, being under 1x sales, based on current annualized sales revenues, may leave lots of room for upgrade. A $1 billion valuation on current shares implies a share price of $6.79 a share.

I believe there is interesting potential and I hold a substantial position. It is an OTC stock, speculative, and subject to pitfalls. But I believe that iQSTEL is undervalued on current business and receiving no value in the market for some interesting and potentially lucrative products.


Disclosure: I/we have a beneficial long position in the shares of IQST either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: Please note that I am not a financial advisor. The article should not be considered as a suggestion to buy or sell this or any other stocks. Consider this one source of a full range of due diligence you should undertake but is entirely my personal opinions. It is strongly recommended that you consult an experienced, qualified, and registered investment advisor before trading.

Source -

Other stocks on the move include BKRKF, SPYR, and RYCEY


SOURCE: pennymillions

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