Laser Photonics (LASE) shares ripped higher this morning (Jun. 3) on a major $13.2 million follow-on order from the US Navy.
The upward momentum drove LASE’s relative strength index (RSI) into the early 90s – indicating extremely “overbought” conditions that often attract profit-takers.
At its intraday peak, Laser Photonics stock was seen trading at more than 7x its price in early Feb.
Significance of Navy’s repeat order for Laser Photonics stock
LASE shares exploded higher on Wednesday primarily because of the announcement that the US Navy has expanded its adoption of the firm’s CleanTech laser blasting systems.
In its press release, management said the order is for handheld and robotic laser cleaning systems to be deployed across naval shipyards for corrosion control, paint removal, and hull maintenance.
Investors cheered the announcement primarily because it represents a significant sales validation for Laser Photonics.
As laser cleaning removes hazardous waste and toxic dust associated with traditional sandblasting, the Navy is fast-tracking the tech to meet stricter environmental compliance mandates.
Following today’s surge, the Nasdaq-listed firm sits firmly above its key moving averages (MAs), reinforcing that bulls have taken control across multiple timeframes.
Northland Capital sees significant further upside in LASE shares
The follow-on order saw Northland Capital analysts upgrade Laser Photonics shares to Outperform, aggressively raising their price target as well to a whopping $9.5.
This represents potential for the stock to more than double again from its intraday peak on Jun. 3.
In its research report, the investment firm said a repeat order from the US Navy proves LASE has successfully crossed the “chasm” from experimental vendor to a deeply integrated defense supplier.
Northland also highlighted that the company’s gross margin on these proprietary laser systems is hovering near 55%, meaning a significant portion of this revenue will drop straight to the bottom line.
And the derivatives market seems to share its optimism on Laser Photonics – with the upper price on contracts expiring mid-October currently set at north of $7, signaling potential for further upside ahead.
Why you still shouldn’t load up on Laser Photonics today?
Investors should also note that heading into June, LASE stock had a short interest of about 11%.
As the positive Navy news hit the tape at the opening bell, short sellers were forced to rapidly buy back shares to cover their positions, creating a textbook short-squeeze that accelerated the upward trajectory.
While this dynamic rewarded traders today, it also means that Laser Photonics gains might actually prove short-lived.
Moreover, LASE remains a penny stock at its core. So it’s inherently vulnerable to unusually high volatility and pump-and-dump behaviour that often leaves late entrants “holding the bag” once the squeeze unwinds.
All in all, given the risks of playing a penny stock – and that too one with the sales multiple already approaching about 4x – disciplined investors are recommended to take profit instead of chasing momentum at current levels.
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