Diamond in the Rough : How this Small Cap's Solution to Rare Earth Shortages could turn it into an Industry Giant

By Hidden Gems Research LLC

Over the past month, one of my highest-conviction defense suppliers delivered what was arguably their strongest earnings call in years—yet the stock initially sold off, drifted lazily through November, and only over the last five trading days has it finally woken up with a +30% surge as the smart money starts connecting the dots. This is exactly the kind of setup Hidden Gems Research exists to find: undervalued, misunderstood, and sitting right on top of multi-year defense and homeland-security tailwinds that the broader market simply hasn’t priced in.

If you’ve been following the shutdown-stalled defense environment lately, you already know why moves like these are flashing a bigger signal than usual.

Below is the breakdown premium subscribers get first. Let’s dig in.

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A Blowout Quarter the Market Slept On

Q1 2026 revenue came in at $15.1M, up 79% YoY, driven by a mix of infrared optics, specialty glass, and early-stage defense production ramps across multiple programs. Operating expenses rose as expected (+66%) due to G5 integration and intentional increases in sales and marketing—expanding reach into defense primes who are now treating this supplier as a strategic partner, not a vendor.

But headline numbers aren’t why this call mattered.

This call mattered because management made it unmistakably clear that 2026–2028 will not be a normal growth cycle. It will be a step-function shift.

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Backlog: The Quiet Story No Analyst Is Valuing Correctly

The company is now sitting on a $90M+ backlog, with more than $20M of it tied to Counter-UAS applications—a number that is almost certainly connected to Ondas Holdings ONDS 0.00%↑ and its expansion into border and critical-infrastructure security with their most recent contract to support autonomous border security for an undisclosed nation.

But here’s the part almost no one caught: Management explicitly framed the backlog was constrained by workforce needs, not the demand for product. That distinction is key to the long-term thesis. The product is cheaper, easier to obtain, and better than generic germanium products. The faster the supply line is enhanced the more interested buyer’s orders can be filled.

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Lockheed Martin: From “Interested” to “Very Bullish”

During the 11/11 call, CEO Sam Rubin didn’t mince words. Lockheed Martin ($LMT) is “very bullish” on their company winning the major next-gen missile (NGSRI) contract which would lead to $50-100 million in annual recurring revenue for LPTH 0.00%↑. Its important to note the higher end is nearly 25% of their current total market cap. Unreal. Even more importantly, Lockheed is already pre-producing components for this missile system inside their expanding Texas vertical-integration facility. Defense primes don’t pre-produce unless they know a deal is coming. This aligns perfectly with hints we heard from Rubin during the Q3 2025 call, where Lockheed expressed unusually strong confidence in the technology. Now it’s evolved from an optimistic approach to strong conviction in their product being the beneficiary of government funding.

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The Missile Program Pipeline Going From 1 to 3

Beyond the flagship missile win, two additional programs are now:

• In active discussions

• Accelerated due to QuadStar testing groundwork

• Potentially entering meaningful development in 2026

These 2 programs leverage the same optical stack, material science, and manufacturing processes already validated by Lockheed’s testing regime. Each one represents another recurring annual revenue stream with the dollar amount for each in the 8 figures. If all three come to pass we are looking at recurring annual revenue near the size of $LPTH’s market cap. This does not include all of the confirmed items in their backlog.

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Counter-UAS: The Ondas Catalyst Most Investors Are Missing

We now know that more than $20M of backlog is tied to Counter-UAS programs.

With Ondas’ newly announced border contracts and the continuing expansion of their CUAS footprint into federal and state infrastructure sites, 2026–2027 could see Substantial follow-on orders, Higher-rate production, and Joint-stack integration between sensors, optics, and interdiction systems. Ondas will provide drone hardware to compliment the towers but someone must provide the eyes. Lighpath is increasingly becoming that someone. Which brings us to the largest new catalyst on the call.

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The Border Surveillance Supercycle: A Sleeping Giant

Rubin disclosed something staggering. 1,000–1,200 new border surveillance towers are expected to be installed. The company expects to win the majority of these camera placements. Average camera revenue: $150,000–$250,000 with the midpoint assumption: $200,000 per system. Do the math: ~$200M in revenue potential. While not reported yet this is real revenue. The tower program is funded, planned, and underway with LPTH 0.00%↑ potentially servicing all 3 contractors working on the project. This is the kind of catalyst that re-rates companies into a new valuation bracket overnight once Wall Street wakes up.

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The Germanium Crisis: A Perfect Setup for Black Diamond Glass

Global germanium supply has become one of the tightest choke points in the entire defense industrial base—affecting night vision, infrared optics, missile seekers, surveillance systems, and anything that requires mid-wave infrared transmission. Belgium and China have exerted pressure on exports. Prices surged. Lead times doubled. Defense primes scrambled. This is the perfect storm for Lightpath. This company’s Black Diamond glass is domestic, supply-stable, cheaper, AND performing better in customer field tests. Repeat customer feedback confirmed “Black Diamond outperforms germanium optics.” This is a once in a decade material-science edge—exactly the kind of moat primes love because it derisks entire supply chains. Competitors cannot replicate the process quickly and industry giants are already know who has the proven product.

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L3 Harris Naval Integration: Destroyers by 2027

The company’s L3 Harris contract is progressing toward a low-rate initial production in the coming months and full deployment aboard U.S. Navy destroyers by 2027. Naval integrations are some of the stickiest, longest-life-cycle revenue streams in the defense world—once a component is validated on a ship class, it usually stays for multiple modernization cycles. This is looking to be another 8 figure deal of recurring revenue that will be added to the ever increasing backlog.

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Updated Revenue Map (Annualized Potential)

Here’s the realistic top-down read of where revenue could land once these programs are fully ramped:

• Missile program w/ Lockheed: $50M–$100M

• Additional missile programs (2 more): $20M+

• Border tower deployments: ~$200M

• C-UAS (ONDS + federal infrastructure): $15M–$100M+

• Other recurring deals: $7M–$10M each (7–8 deals underway)

Total potential revenue equivalent: ~$350M–$400M annually
Current market cap (12/4/25): ~$350M. If even half of these lanes hit, this stock is mispriced by a mile.

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Final Take — The Market is not pricing this like an Onshore Solution to the Germanium Shortage

For most of November, the stock drifted because the overall defense complex froze during the longest government shutdown in U.S. history. Contracts slowed. Timelines slipped. Liquidity came out of small caps. Regardless the work continued, and the last five trading days proved it, +30% on rapidly increasing volume as the market begins to process what this earnings call actually signaled. To summarize, this company is becoming:

• A critical supplier for next-gen missile systems

• A material-science leader solving a germanium crisis

• A go-to optics provider for border towers

• A naval integration partner for L3 Harris

• A C-UAS backbone for expanding ONDS deployments

With a backlog it can barely hire fast enough to execute. There are very few small-cap defense companies with this level of visibility, recurrence, and multi-theater exposure. And almost none trading at this valuation. I don’t expect it to stay at these levels for long.

Risk & Disclosure Disclaimer

This publication is for educational and informational purposes only and does not constitute financial advice, investment recommendations, or an offer to buy or sell any security. I am not a registered investment advisor. All investments carry risk, including the potential loss of principal. Readers are solely responsible for their own investment decisions and should conduct their own independent research or consult a licensed financial professional before making any investment decisions. Any positions discussed may change at any time without notice.