Neonode’s Q1 2025: Can This Touch Sensing Titan Pivot to Dominance in IoT & Auto?

Investors, fasten your seatbelts. Neonode (NEON) is about to pull the curtain on its Q1 2025 earnings—the moment of truth for whether its years-long pivot from hardware to high-margin licensing is finally paying off. With automotive electrification and IoT adoption exploding, this Swedish tech underdog is betting its MultiSensing® platform can be the hidden enabler of tomorrow’s connected world. Let’s dissect if Q1’s results will validate this vision—or expose it as a pipe dream.

1. Revenue Diversification: From Smartphone Slump to Automotive Gold

Neonode’s traditional bread-and-butter—smartphone touch interfaces—is dying a slow death. Legacy license revenue dropped 29% in 2024 as phone manufacturers slash costs. But here’s the twist: non-recurring engineering (NRE) deals in automotive and IoT are surging.

In Q3 2024, NRE revenue skyrocketed 1,579% year-over-year, fueled by a driver monitoring system (DMS) project with a commercial vehicle OEM and partnerships with companies like NEXTY Electronics (Japanese amusement markets) and YesAR (holographic infotainment). This is the future Neonode’s betting on: high-margin, project-based fees in sectors where touch sensing isn’t just a “nice-to-have” but a safety-critical must-have.

But here’s the catch: Q1 2025’s revenue breakdown will reveal if this pivot is real or a mirage. Analysts project Q1 revenue of $650,000 (down from $800,000 in Q3 2024), but the mix matters. If NRE and IoT licensing now account for >40% of revenue, this stock could explode.

2. Gross Margins: The Holy Grail of R&D Efficiency

Gross margins are the lifeblood of tech plays—especially for companies like Neonode, which rely on IP licensing. The numbers tell a compelling story:

• Q1 2024: 38.9%
• Q4 2024: 42% (a record high)
• 2025 Target: 45% by Q4

This upward trajectory isn’t luck. Neonode has slashed costs by axing hardware manufacturing and doubling down on software. Its MultiSensing® platform—combining touch, gesture, and proximity sensing—now runs on 90% fewer components than older systems.

If Q1 hits 43-44% margins (as guided), this stock’s valuation math flips. Even with flat revenue, higher margins mean cash flow turns positive faster. For a company with $18.6M cash as of Q3 2024, that’s a game-changer.

3. Strategic Partnerships: The Tipping Point for IoT & Auto Dominance

Neonode isn’t just chasing trends—it’s owning them. Its DMS tech for commercial vehicles isn’t just a side hustle: it’s a $400M market by 2030, per analysts. Meanwhile, its licensing deals with YESAR and NEXTY hint at untapped markets:

• Holographic infotainment: Think AR dashboards for electric trucks or immersive amusement park rides.
• Industrial IoT: Sensors for smart factories or logistics hubs, where Neonode’s low-power tech shines.

The key Q1 question: Did these partnerships start to translate into bookings? A single $1M licensing deal in Q1 (not unreasonable given past NRE spikes) would send shares soaring.

4. Valuation: A Contrarian’s Dream at 3x Sales

At current prices, Neonode trades at just 3x trailing sales, absurdly cheap versus peers like Analog Devices (ADI @ 4.8x) or STMicroelectronics (STM @ 2.5x, but with far lower growth prospects).

But here’s the kicker: Neonode’s forward-looking multiples are even more compelling. If it hits $5M in 2025 revenue (up from $3.1M in 2024) and 45% margins, EPS could turn positive by 2026. That’s a valuation inflection point.

Final Verdict: Q1 is the Crossroads—Buy the Dip, Then Double Down

The stakes are clear. If Neonode’s Q1 results show:
1. NRE/IoT revenue > 40% of total,
2. Gross margins ≥ 43%,
3. New auto/industrial partnerships announced,

this stock could soar to $5+ by year-end as Wall Street wakes up to its overlooked moat. Even if Q1 misses slightly, the $18M cash hoard buys time to execute.

Investors, this isn’t about hoping for miracles—it’s about backing a strategic pivot that’s already delivering proof points. The IoT and auto markets aren’t slowing down. Neonode’s Q1 is the catalyst to prove it’s not slowing down either.

Action Item: Buy the dip below $2.50. Set a stop at $2.00 and aim for $4.00 by H2 2025. This could be the contrarian’s biggest score of the year.

Disclosure: Analysis for informational purposes only. Always do your own research.