Zacks Investment Research recently initiated the coverage of Franklin Wireless Corp. (FKWL Quick QuoteFKWL - Free Report) with a “Neutral” recommendation, marking the firm’s first Wall Street research report on the San Diego-based wireless solutions provider.

Franklin Wireless, operating under the brand “FranklinAccess,” is carving out a niche in the 5G and 4G LTE ecosystem through a portfolio of mobile hotspots, fixed routers and IoT gateways. The report highlights both the compelling upside potential and key risks that investors should weigh when considering this microcap stock.

Franklin Wireless’s impressive 58.7% year-over-year revenue growth through March 31, 2025, to $39.16 million is driving our coverage. This rally is anchored by robust demand from major North American telecom customers, who now account for nearly all of the company’s revenues. Third-quarter revenues alone jumped 30% year over year, signaling resilience even as other hardware peers face post-pandemic demand tapering.

The gross margin has also trended higher year over year to 17% from 11.6%, thanks to a strategic shift toward premium devices. This suggests that Franklin Wireless is beginning to exert pricing power, a rare feat among small-cap hardware manufacturers.

Franklin Wireless’s balance sheet is another bright spot. With $38.14 million in cash, no debt and a current ratio of more than 4.3X, the company enjoys exceptional liquidity, giving it the flexibility to invest in R&D or pursue acquisitions without shareholder dilution.

The research report highlights several key factors that can drive FKWL’s growth. The May 2024 launch of Sigbeat Inc., a joint venture with Forge International, can also serve as a growth lever. With a focus on global telecom modules, the venture diversifies Franklin’s revenue streams and international exposure — areas previously lacking.

However, potential investors should consider certain risks outlined in the report. Chief among them is the company’s extreme customer concentration, with 95% of sales coming from just two clients. Such dependence limits visibility and magnifies contract risks. Also troubling is an ongoing executive compensation dispute tied to legal settlements, which raises corporate governance concerns.

Other notable red flags include unresolved shareholder lawsuits linked to a 2021 device recall, a $10-million unsecured intercompany loan exposed to FX losses and rising operating costs that outpace revenue growth. Franklin Wireless’s declining R&D investment and aging IP portfolio suggest a need for renewed innovation to maintain relevance in a fast-moving industry.

While FKWL trades at a deep discount relative to peers — just 0.21X EV/Sales and negative EV/EBITDA — those multiples reflect not just its microcap status but also the structural challenges it faces.

You are encouraged to view the full Zacks research report for a comprehensive analysis of FKWL's financial health, growth initiatives and market positioning. This detailed report explores the company's operational strategies and financial performance, highlighting risks and opportunities that may impact its direction.

Read the full Research Report on Franklin Wireless here>>>

Note: Our initiation of the coverage on FKWL, which has a modest market capitalization of $172 million, aims to equip investors with the information needed to make decisions in this promising but inherently risky market segment.