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Neonode Inc

Initiating coverage

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Neonode: The Midas Touch

Neonode (NEON.US) is a human interaction technology company, up until now mostly known for licensing its optical touch solutions to customers with an installed base of in total over 38 million units.

However, Neonode has conducted a major strategic change as it gradually will shift from selling licenses to hardware modules. This new strategy will enlarge the addressable market for Neonode’s products fivefold as well as dramatically increase the revenue and profit per sold unit. We believe this is not fully understood by investors but coming quarters will show the results of this new strategy.

We initiate coverage with a long-term base case valuation of $3.7 per share, compared to today’s share price levels of $1.3. Our fair value range in a bear- and bull case is $1.2 – 6.2.

HP's announced acquisition of Samsung's printer division on September 12 is not included in the research report but we see no major changes from this event.

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