Protagenic Therapeutics Inc. (PTIX)

[QTRADERQ]

My price target changed to $1.50. It previously was $1.20 - $1.50.

ATRN is in hyper growth mode. Their sales mix has changed going forward and as a result 2011-12 is a transitional period for ATRN which will show huge revenue growth imo. Looking forward in 2012, large customers like DirectBuy have been added to their Transactional business and their Kazaa business should be gone. ATRN total sales imo will be $40 mil in 2011... and ramp up to $60 mil in 2012... Plus, their debt should be gone.

**The previous paragraph is very important to understand so let's analyze the numbers a little deeper.

$40 mil sales projected in 2011
The 2011 sales are a combination of Transactional Search revenue and Kazaa Digital Subscription revenue. From the 10Q, the total 9 month sales were $25.6 mil, and based on DirectBuy being added in the middle of the 3Q they had $12.3 mil total sales (the breakdown was: $9.8 mil Transaction revenue; $2.5 mil Search revenue)... It's easy to foresee ATRN will do $15 mil total sales in the 4Q 2011. (I'm projecting Transactional Search revenue will rise to $12.5 mil in the 4Q, from $9.8 mil in the previous quarter, because ATRN will a full quarter of DirectBuy sales... and projecting Kazaa sales will stay flat at $2.5 mil.)
http://www.otcmarkets.com/edgar/GetFilingHtml?FilingID=8241320

$60 mil sales projected in 2012
If you annualize the 4Q 2011 sales of $15 mil, you get projected sales of $60 mil in 2012.

That's a 50% growth rate over 2011 ($60 mil revenue vs $40 mil in prior year) which imo warrants a 2.5x sales multiple, instead of a 2x multiple which I had previously applied to my valuation. This is the reason for changing my price target to $1.50.

ATRN valuation based on projected sales of $60 mil in 2012
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=72298786

(Note: If ATRN continue's to add additional customers (which I expect) then my price target would be raised. At some point ATRN valuation would switch from being based on a multiple of sales (P/S ratio)...to a multiple of earnings (P/E Ratio...Perhaps this will happen in the 2H 2012.) But, for now ATRN is in hyper growth mode and that is the only metric we have to value them accordingly.)

(Disclaimer: I am a retired CPA and I am also long ATRN. I do sell shares of ATRN from time to time. This post is my opinion only... and should not be relied upon in making investment or trading decisions. You could lose all of your money.)


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