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The stock has been relatively quiet, while gold has corrected from $1450 to $1250 in quick time. Gold is around critical levels and it is important for it to rebound soon. $1200-$1450 can be the range for the medium term. The companies have reduced cost to adjust to the low price scenario, so if gold can consolidate in the range, then the financials for many companies will improve. Low cost producers will obviously be at an advantage. Most of the gold stocks are again at 52 week lows, and the valuations are good if one believes that $1200 will hold when tested. For Pershing, the results of the 2013 drilling program at its Relief Canyon Mine property were promising as all seven of the holes reported had intercepts with gold grades that are significantly higher than January 2013 resource estimate. Further, 6 out the seven holes were found to contain gold intercepts that exceed the average grade of the ore mined in the late 1980s. The CEO Stephen Alfers was confident that Relief Canyon is getting better, and bigger, and the overall grade of the Relief Canyon deposit can be higher than the deposit mined in the 1980s. Results for more holes will be announced in due course. The low-angle geometry of the Lower Zone and the underlying gold-mineralized jasperoids was found amenable to open-pit mining. That can help in achieving lower cost of production. The company is planning to drill at about 20 new sites after obtaining approvals. This will cost approximately $500,000, and the company has the funds for it. Meanwhile, Barry Honig continued to acquire shares of the company. He now owns more than 15.58 million shares. The last purchase was made on November 25, and he has purchased nearly 800K shares in November.
Precious metals have corrected significantly, and Gold is back at the bottom of the range. Presuming that $1200-$1450 is the range for the medium term, one can expect a bounce. The stocks have also corrected and most are near the 52 week lows. The valuations are good if one considers some specific companies, and any rebound in gold price can take those stocks much higher. Most of the companies have made cost adjustments to align themselves to the low price scenario. Goldcorp has taken the impairment hits, and is trading at less than its book value. However, there has been yoy increase in all-in sustaining costs in Q3'13, and the sales also declined sharply. The all-in costs in Q3 came in at $992 per ounce compared to $801 for Q3'12. This compares well will many peers, though there are even development stage companies with lower expected cost of production like Pershing Gold (PGLC. Analysts are relatively positive on the stock. One analyst on SA recently expressed positive sentiments about the company in comparison with Barrick Gold (ABX). The author mentioned that Goldcorp has implemented a successful and disciplined growth and capital allocation strategy, and is much lower on debt. It operates in low risk jurisdictions and maintains its strong focus on gold with only a small exposure to silver. The cash position is also good as it had more than $1 billion on September 30. Goldcorp needs to keep the costs of production and capex under control so that it can deliver better results in future quarters. The focus on cost rationalization is evident from what the management stated during the earnings release. Most of its mines saw reductions in costs compared to Q2, and the efforts can have positive impact on future financial results. Importantly, the management stated that the company was past the peak of capital expenditure. Low cost companies will be preferred by investors, and Goldcorp appears to be taking the right steps to lower the costs systematically.
IAG has corrected in tandem with the gold prices, and the probability of a rebound cannot be ruled out if gold shows some strength. It appears to be a good bet at current levels, especially if one considers the high dividend yield of nearly 6%. Presuming that the company is able to deliver reasonably good financial performance in the next few quarters, the chances of capital appreciation are also high. Gold is expected to rebound like it did last time, though no one can be absolutely sure. Last time it had traveled from $1200 to above $1400 in quick time. IAG is trading at 0.43 times its book value, and the price to sales is also one. This is good considering that the company is profitable on a ttm basis. The operating margins are nearly 25%, and the net margins are 6%. The leverage is also reasonable if one considers the cash position. The ttm P/E is around 17 and the forward P/E is around 15. However, the cost of production increased by 10% in Q3 on a yoy basis. The all-in-sustaining costs came at $1134 per ounce which is high compared to several other players in the sector. There are even some development stage companies with lower expected cost of production like Pershing Gold (PGLC). However, the company has taken the steps to reduce costs, and is on track to achieve the targeted cost savings of $100 million in 2013. The target was for reduction in operating costs by $54 million, exploration cost by $40 million and corporate general and administrative costs by $6 million. At the end of the third quarter, the company had already achieved 77% of planned reductions. So the company can report better numbers going forward which will have a positive impact on the valuations. As always, gold prices remain the key.
The stock has corrected sharply after missing the analyst estimates for the third quarter. The net loss was slightly more than estimates, and the revenues were a little more off than what the market had anticipated. Even the last earnings had led to a negative reaction. Consecutive quarters of performance below expectations has weakened the sentiments significantly. It has managed to bounce from the critical level of around $5, but the volumes have been going down. So the recovery is weak, and it will require improvement in fundamentals to reverse the sentiments. However, the company has been showing improvement by reducing the losses. In Q3, the losses declined sequentially and on a yoy basis. The revenues also increased on a yoy basis, though they declined sequentially. Operationally, it added 2% lesser customers in Q3, but the total active customers increased by 6% to 2.1 million. For the first nine months of 2013, the net sales was $285 million compared to $245 million in the first nine months of 2012. The net loss also declined from $15.9 million to $10.9 million during the same period. So though the company is unable to exceed street expectations, there have been improvements. However, net profit is still elusive, and is likely to remain so for some time unless there is some remarkable improvement. Cash and equivalents have also declined from $32 million on December 31, 2012 to $19.23 million on September 30. Overall vitamins / supplements / wellness market is expected to grow at a healthy pace, and Vitacost can take leverage this to its advantage. The growth potential is evident from the success of MusclePharm (MSLP) which has moved from near zero to $100 million revenues in a few years. To improve the sentiments, Vitacost needs to deliver positive surprises in the next few quarters. Otherwise the stock may remain weak.
Consecutive quarters of poor performance has had a decisive negative impact on the stock. The break below $20, and now below $15 indicates that there could be more pain in the offing. The stock needs to bounce immediately with good volumes, otherwise it may go down by another 10%. The main problem is the unpredictability in the earnings which makes it difficult to take a call on the future valuations. The fluctuations in the top line and the bottom line have decreased the faith of the investors over the last few quarters. The stock is now one third of its peak value in September 2011. The revenue stream is not diversified and there is excessive dependence on a few licensees. Even other similar sized companies may have a similar problem, but it is important for Acacia to do something about it fast. Lawsuits outcomes are unpredictable, and many companies in the sector are making efforts to diversify the IPR portfolio and focus on licensing revenues to get regular inflow. Marathon Patents Group (MARA) is attempting a balance between diversified licensing revenue stream and enforcement through litigation. Zacks now has a strong sell rating on Acacia, and the full year EPS for 2013 is estimated at 33 cents which indicates that the valuations are likely to remain high. The counter lawsuit by Microsoft (MSFT) has also had an impact on the sentiments. Microsoft has accused Acacia of claiming payments based on litigation tactics rather than demanding payments based on the actual valuation of its patents. The good part is that the company is debt free and has a huge amount of cash. However, the recently announced repurchase program will lead to some depletion over the next few quarters. The program is for purchase in the aggregate up to $70 million of its common stock through the period ending May 14, 2014.
The stock has done great after the earnings. The momentum has taken it 35% above the 52 week low made in September. It looks good for more, but its performance in subsequent quarters needs to be good. This time it beat analyst estimates of earnings by just one cent. The stock had been correcting for many months, and the level of shorts was extremely high. That could have been one factor for such a strong reaction. Goldman Sachs recently upgraded the stock from buy to a conviction-buy, and analysts at Jefferies Group reiterated their hold rating with a price target of $42. Deutsche Bank also increased the target price to $55 from $52 with a buy rating. An article on Motley fool was positive about the future prospects of the company, and expected it to do better compared to GNC Holdings (GNC). The analyst's opinion was primarily based on better performance of VSI over the last few years. The valuations of VSI are still okay compared to some peers, though further rise in the stock price could lead to some stretching on that account. The ttm P/E is 25 and the forward P/E is 21. Growth in vitamins and supplements market is likely to be robust, and players like VSI can leverage the opportunity to their advantage. The growth potential is evident from the performance of MusclePharm (MSLP) which has moved from scratch to $100 million in revenues in a few years. For Vitamin Shoppe, the ttm revenues are $1.05 billion and the net income is $65 million. This indicates prospects of moderate improvement compared to 2012 when the revenues were $950 million and the net income was $60 million. It needs to be more consistent in its performance so that the uptrend is sustained. Next few quarters will be important.
The third quarter numbers were very good and the stock has really taken off after that. Topline growth has never been a problem for the company. Even the bottomline was improving recently. It has come closer to reporting a net profit on a full year basis. On a ttm basis, the company has a revenue of $728 million and the net loss is $9.25 million. In 2012, the revenues were around $650 million and the net loss was $16 million. For the nine months ended September 30, 2013, the Company reported revenues of $581 million, up 22% over $478 million for the first nine months of 2012. Net loss attributable to the Company was $3.0 million compared to $14.0 million for the first nine months of 2012. So 2013 is most likely going to be a much better year for Ladenburg. The support of Dr. Frost is always encouraging for investors. Most of his companies' stocks have done great over the last few months. He is always on the lookout for collaboration between his various companies. His company Biozone Pharmaceutical (BZNE) was recently merged with Cocrystal Discovery, another company where Teva (TEVA) and OPKO (OPK) have a stake. Ladenburg has now appreciated by 143% over the last 52 weeks with most of the gains coming in 2013. It has broken out above important hurdles, and one or two good quarters can take it even higher. The market has recognized the potential of the company, and the low percentage of float has helped matters. The valuations are still reasonable, as the market cap to sales is 0.73. The cash on books on September 30 was around $55 million and the debt was around $75 million. So Ladenburg seems to be good for more, though it needs to deliver consistent performance over the next few quarters.
The sentiment about the stock has been dampened after the news related to the short position by Lakewood. The position is worrying because earlier the company had a long position in the stock. Investors were perturbed by the change in stance. However, some analysts remain positive on the stock mainly based on the future potential of the company due to its pipeline and the numerous acquisition over the last few years. Another important factor is the support of Dr. Frost who has been instrumental in taking to stock to these high levels. He has been a buyer from the open market, and owns a significant percentage of the float. Short positions can backfire in case insiders like Dr. Frost decide to increase their position. On October 31, 20% of the float was short. This increases the possibility of a squeeze. An article on seekingalpha mentioned that the recent correction in the stock is an overreaction by the market to the Lakewood news. The stock may rebound, as it has already done, and move higher based on the potential of the company. The analyst also mentions that the high level of shorts could add to the buying pressure in case of a positive news. Dr. Frost has been active with his other companies as well, and recently Biozone Pharmaceuticals (BZNE) was merged with Cocrystal Discovery where Opko and Teva (TEVA) have a stake. For Opko, the valuations are mainly based on future prospects and the positivity associated with ownership by Dr. Frost. The investments may take time to materialize. Still, the recent performance of the stocks owned by Dr. Frost helps increase the probability of a strong rebound. However, it is good to be a bit cautious, and keep a watch on the volumes. The investors can either book partial profits or tag along with a stop loss.
An article on SA recently mentioned that despite the patent cliff worries, the company's target price has been raised by Susquehanna, and Soros Fund Management has increased its equity stake. The generic segment is expected to do better over the years as there is a global shift from patented drugs towards the generic ones. The growth in this segment over the next few years will surely help Teva as more than half its revenues come from generics. Even if Teva is able to maintain its market share in the US generics market, it will grow at a decent pace over the next few years. Copaxone patent expiry will surely hit the sales, but new launches and better performance from existing products can help make up for the loss. It got an Orphan designation for Treanda in indolent B-cell non-Hodgkin lymphoma, and has six months of pediatric exclusivity for the drug. Performance by ProAir and Qvar is also expected to help. Entry into other segments, and its strong pipeline will also lead to tangible results over the next few years. The R&D spending is being increased to support future growth. The next few years are likely to improve the margins of the company as it is focusing on making itself more efficient and cutting down the costs. 70% of the expected cost savings will be achieved in the upcoming three years. The forward P/E is reasonable and the dividend yield is also better than the industry average. Dr. Frost has been extremely active in exploring collaboration opportunities between his companies. Cocrystal Discovery, a company where Teva and Opko (OPK) have a stake, recently merged with Biozone pharmaceuticals (BZNE) to take advantage of expected synergies. Teva, meanwhile, remains stuck in the $6 range between $36 and $42. It will require something major to breakout beyond this strong resistance.
Marathon's subsidiary Vantage Point recently filed 5 patent infringement lawsuits against biggies like Apple, LSI Corporation, MediaTek USA, Panasonic Corporation of North America and Sharp Electronics. Vantage has a total of 27 total active lawsuits. This particular patent is for "Method and Apparatus for Translating Virtual Addresses in a Data Processing System Having Multiple Instruction Pipelines and Separate Translation Look aside Buffers for each Pipeline." Recently the company's subsidiary CyberFone had entered into a license and settlement agreement with a consumer device and electronics company. The CyberFone patent has generated several settlements over the last two years, and there are other cases being pursued. The company reported $710K revenues in Q3'13, and total revenue for the nine months of 2013 were $2.2 million. The net loss per share came at 54 cents for the nine month period in 2013 compared to net loss per share of $2.38 in the first nine months of 2012. Importantly, the net cash used declined significantly from $460K in Q2'13 to $253K in Q3'13. It had $5.86 million cash as on September 30, 2013 compared to $2.35 million on December 31, 2012. The company is still away from profitability on a net basis, but it is good that it has started to get some revenues going. Next few quarters will indicate the regularity of the inflow. The recent settlements and more licensing arrangements could add to the revenues. The company now has nearly 100 patents in seven portfolios and around 60 active lawsuits. As mentioned in an article on SA, the company has two businesses. An IP services business, which provides clients with advice and services to help them attain a financial and strategic return on their IPRS, and an IP licensing and enforcement Business. The portfolio is diversified and is generating revenue so it is not totally dependent on the outcome of these lawsuits.
The earnings showed good growth in sales and decrease in loss per share for the third quarter. The net sales increased by 36% to $25.34 million. Nutritional product sales in international markets was an important contributor to growth with 28% rise to $7.89 million. For the nine months ending September 30, the net sales increased to $73.38 million compared to $50.56 million in the first nine months of 2012. The net loss declined from $15.9 million or $9.62 per share in the nine months of 2012 to $13.7 million or $2.07 per share in the nine months of 2013. Growth has never been a problem, and now the net loss is also declining. Current growth strategy includes increased penetrations of both the domestic and international markets and improved marketing / branding. For improving margins, the company is making efforts at streamlining the operations and seeking operating efficiencies in all areas. Its agreement with Costco (COST) and collaboration with Arnold will help increase the pace of growth. As mentioned in an article on SA, if supplemental and proactive nutrition market continues to grow at current rates, the total domestic market could be around $30 billion in 2014/15. So there is a strong possibility of the company being able to continue the good growth story. The analyst predicted that a '1% share of the market could see a price per share upwards of 24-32 dollars pending total outstanding shares at such a time. Even in the event of substantial dilution moving forward (current outstanding share estimates are at about 8.8 million) a price target of 18-21 dollars by 2015 would be more than reasonable.' Once it moves closer to profitability, we could see a significant upside in the shares. The presence of investors like Dr. Phillip Frost is always reassuring. He remains on the lookout for synergies between the various companies owned / controlled by him.
The reaction to the merger is positive, and the volumes are also good. This is part of the strategic transition announced by Biozone some time back. More details about benefits of the merger with Cocrystal Discovery will emerge over the next few days and weeks. The combined company will initially continue to trade on the OTCBB under the existing symbol of BZNE. The existing shareholders of Biozone and Cocrystal will own approximately 40% and 60% of the combined company respectively, and the merger is expected to close at the end of the year. Cocrystal Discovery is a biotechnology company developing antiviral therapeutics for human diseases. Frost Group and his companies Teva (TEVA) & OPKO (OPK) have earlier made investments in Corcrystal. The PR mentions that the company has five therapeutic programs targeting the Hepatitis C Virus (HCV), Influenza, the Human Rhinovirus (HRV), Dengue, and the Norovirus. It is targeting two Hepatitis C replication enzymes, with its Polymerase program at lead optimization stage and its Helicase program is at lead identification stage. Dr. Gary Wilcox, the existing CEO and Chairman of Cocrystal, will be the CEO and Chairman of the combined entity. Wilcox expects that the merger will significantly enhance Cocrystal's ability to bring its small molecule inhibitors of the viral replication complex to market. Dr. Frost also expressed confidence about the future of the combined entity due to the quality of the management. Dr. Wilcox has a good track record in the industry. He has served on the Board of Icos Corporation for several years during which Icos was sold to Eli Lilly for $2.3 billion. At Icos, he led the teams which developed Cialis which now has annual sales of $2 billion. Noble Prize winner Dr. Roger Kornberg, Chief Scientist and a Director of Cocrystal Discovery, will be the Chief Scientist of the combined entity.
The stock has corrected significantly from the highs made a few months ago. The time period between now and the Markman hearing is about 7-8 months, and the intervening period could provide opportunities to enter the stock. The company has made efforts to enter into segments with high potential for growth. Its forays into daily fantasy sports, mobile / online gaming, and more recently, the social casino segment are likely to yield positive results over the long term. The recent acquisition of Avcom, a game development studio producing free to play mobile and social casino-style games, marks its entry into the social casino segment. Avcom’s assets include physical and IPRs related to Mobileveg and Freeawesome and the under-development game 'SlotChamp'. The acquisition was funded by stocks, and the initial payment was valued at $1.55 million. Half of the issuance to the common stockholders and the option holders will be placed in escrow and released upon the later of the commercial release of an agreed upon game, or six months after closing. In addition, the common stockholders may be awarded contingent consideration of $1 million through the issuance of up to 333,000 shares if gross revenue from the game reaches $3.0 million within 18 months. That figure provides some indication about the expectations from the particular game. It has filed an application for New Jersey Casino Service Industry Enterprise license, and hence is eligible to be considered for suitability before i-Gaming goes live in New Jersey in a few days. So the future is not solely dependent on the outcome of the lawsuit, and the real potential lies in these businesses. These are likely to yield tangible results in due course, and the company needs to continuously find the resources to build these businesses so that they become its mainstay.
The stock has been moving up quietly over the last one week. It may make a stronger move after the update on the trials is announced early next month. Senesco's platform technology has a lot of potential, and the trial results so far have confirmed that the possibilities are tremendous. This is especially true if one considers the huge market for cancer drugs. Factor 5A can regulate programmed cell death and cell survival through controlling the expression of pro and anti-apoptotic proteins. The initial use of the technology was to extend shelf life of food and increase crop yield, but the inverse activation of Factor 5A also had huge possibilities for the treatment of cancer. The main drug candidate SNS01T targets B-cell cancers by selectively inducing programmed cell death (apoptosis) using Factor 5A. Cancer therapy trials focus on multiple myeloma and other B-cell cancers. SNS01T has been found to inhibit the growth and even shrink tumors of human B-cell cancers in animal models. SNS01T has an orphan drug status granted by USFDA. The company has numerous patents related to Factor 5A platform. The use in agricultural biotechnology and biofuels development also holds a lot of promise. It has collaborations with big companies like Bayer Crop Science and Monsanto to name a few. In addition to increasing seed yield and plant size, the technology can provide resistance against premature cell death caused by environmental stresses like frost, drought, heat, and soil salinity. According to the arrangements, Senesco is entitled to earn R&D milestones and royalties if their technology is used by the partners. Even the last 10Q contained a milestone payment of $100K. However, the trials and approval will take time and will require funding. The cancer treatment related trials & approvals may take a couple of years. Meanwhile, the agricultural licensing revenues can provide some cash flow, but the company will require external funding from time to time to pursue its research.
Despite the huge correction over the past one month, the stock has done extremely well on a 52 week basis. It is up more than 90%, and seems to be recovering from the post earnings sell off. The stock has been downgraded by Zacks from an “outperform” rating to a “neutral” rating on Friday. The price target is $20.30 which indicates a 17% upside potential from the market price. Analysts at Thomson Reuters/Verus had also downgraded Monarch from buy to hold recently. The full year earnings per share is expected at $1.09. The valuations are better now and offer an entry opportunity for those who believe in the growth story. The company has only two properties which increases the risk due to lack of diversification. However, as mentioned in a Motley article, the properties are generating cash and do not face as much competition as many of the properties of competitors do. The debt is at manageable levels, and the cash position is also good. On September 30, it had $17.5 million cash and $56 million debt which is reasonable if one factors the revenues and net margins. The Monarch Black Hawk property will be developed into a full-scale resort, and that holds a lot of promise for the company. The industry is capital intensive, and funds are required for creation of facilities and inorganic growth, especially in emerging growth segments. Companies like Caesars (CZR) and MGT Capital Investments (MGT) have acquired companies in the fast growing social casino space. The analyst mentions that 'Monarch is a more nimble, healthier business at the moment, and the earnings multiple may be misleading at this point.' Even the absolute valuations are good, as the stock is trading at 17 times trailing earnings and 14 times forward earnings. The price to sales ratio is 1.48 and the price to book is 1.77.
The stock has done well over the last one year. It has corrected a bit over the last couple of weeks, but has appreciated 60% in 2013. Recent analyst opinion is positive, with expectations of growth in top and bottomline. The performance in Q2'14 has improved the sentiments as the company beat analyst expectations and upped its EPS guidance for the year. The non-GAAP net revenue of $1.04 billion was above guidance of $975 million, and the Non-GAAP diluted earnings per share of $0.33 was significantly above the guidance of $0.12. The annual earnings per share guidance was increased from $1.20 to $1.25 per share, and the ttm non-GAAP digital net revenue was up 22% to $1.75 billion compared to the previous year. Mobile and handheld non-GAAP digital net revenue increased 19% to $105 million on a yoy basis in Q2 FY14. TheStreet has a hold rating for the stock because of the good stock price performance and growth in earnings per share. However, declining revenues are a matter of concern. The field is highly competitive with strong competitors like Activision, and Zynga. Smaller players like MGT Capital Investments (MGT) are also entering the field indicating the future potential of the space. The stock is trading at 31 times ttm earnings and 15 times forward earnings indicating good growth prospects. The PEG is 1.20. Looking at past performance, the topline has been declining, though the last couple of years have seen minor GAAP net profit. The cash position remains good with $1.42 billion as on 30 September, and the debt was $570 million. The next few quarters will indicate whether the company will be able to revert to a consistent growth trend. The strength of its recent offerings and agreements is likely to drive the growth in the top and bottomline, provided the costs remain under control.
The uptrend seems to have gathered even more momentum after the court ruling. It continues to make new 52 week highs and the volumes have been very good. The Jury found that the company had not infringed on the patents of Personalized Media Communications in its game titles. This helped it avoid royalty payments of around $25 million, and will deter others from filing similar suits. The last one year has seen the stock appreciate 85%, though it is still trading at a fraction of its value in March 2012. Nothing much has changed fundamentally, as the company continues to carry a net loss on a ttm basis. There has been reduction in net loss in a couple of quarters, but the trend is not in place yet. In addition, even the topline has started to decline consistently. The company did better than analyst estimates in the last quarter, and was cash flow breakeven. The improvements are good, but more such signs are required to confirm that a trend is in place. The competition is immense with existing players like Electronic Arts (EA) and Activision (ATVI), and new entrants like MGT Capital Investments (MGT) attempting to attract users through novel creations & strategies. Cash position of Zynga is very good and it has no debt. That reduces the investment risk. The stock is surely on an uptrend, and the momentum cannot be ignored. Investors have high hopes from the new CEO due to his successful track record in the industry. The social mobile games industry is still young and hence the growth may be robust. Zynga can leverage the growth to revive the falling topline. However, it needs to keep the costs under control so that it achieves the much needed profitability on a net basis.
Slower than expected pace of growth in top-line led to a sell-off in the stock. It has recovered, but the weakness is not over. The valuations are better after the fall. However, some analysts have expressed doubts about the future performance of the company. One article on seekingalpha was particularly negative about the prospects, and the author predicted lower earnings in 2014. The analyst predicted revenue growth to be between 0-6% next year as headwinds from mobile and a less-friendly search algorithm continue. He expects the EPS to come in between $3.85 and $4.05. In the last quarter, there was 6% yoy growth in revenues, though there was a 5% sequential decline. The EPS came in much better than estimates as the net income increased by 138% on a yoy basis. Even the sequential growth was significant. The article mentioned that IAC is generating less revenue per eyeball, indicating less than optimal monetizing of the consumer base. IAC's websites are not that suited for viewing through mobile devices yet, and hence monetizing may not be optimal. The recent change in fortunes of Facebook are primarily based in increased confidence in its ability to leverage the transition to mobile devices. IAC's dependence on Google may hurt its growth prospects because Google may continue to update its algorithm to the disadvantage of others. However, considering the good performance of IAC over the years, one cannot underestimate its ability to improve its performance. Increased use of internet through mobile devices can also be viewed as growth opportunity. IAC's investments into emerging growth segments may help improve growth in the long term. It invested in fantasy sports where Yahoo (YHOO), Comcast (CMCSA) and MGT Capital Investments (MGT) have put in their money. So while analysts may turn negative, one can remain cautiously optimistic. Performance over the next couple of quarters needs to be watched carefully.
The stock is relatively buoyant after the Wells Fargo upgrade. The effect is not that huge because the stock has already done well over the last one year. It is up nearly 40% during the past 52 weeks. The trend has been strong even if one considers the price movement over the last two years. The stock has appreciated by nearly 90% during the period. The note by Wells Fargo is optimistic about the prospects of Penn. The analysts advise the investors to put in money in the stock. They consider the stock to be undervalued because of an overly pessimistic industry view, confusion over how to value PENN post the spin-off, and a misconception that the company's cash flows are now significantly more volatile than its peers. Also, the current valuations overlook its options to create value through unit growth supported by its balance sheet and strong FCF. The analysts believe that the estimates and industry trends are expected to stabilize next year because of the limited supply growth until 2016 and 'well known risks in the Midwest'. They have upped the price target from $15-$16 to $16-$18. The stock is surely lower on valuations compared to the peers, especially if one considers that the company is profitable on a net basis. The entire industry is highly leveraged as it depends on capital investments for acquiring real estate etc. It also needs funds for acquisitions in emerging segments. Social casino has seen some activity with company's like Caesar (CZR) and MGT Capital Investments (MGT) making acquisition to gain access to this fast growing segment. Leverage puts pressure on the net margins, hence Penn should keep a watch to ensure that debt remains within reasonable limits. Further, the recent rise in the stock has made it a bit vulnerable to profit booking in case of slippages.
The applications of Senesco's SNS10T in cancer are discussed much more than its applications in the field of agriculture. Due to the possible benefits like increasing crop yield, the agricultural applications also hold tremendous potential. The company already has licensing arrangements with other companies, and there is small inflow related to this. As mentioned in the recently filed 10Q for the period ending Sep 30, the company received a revenue of $100,000 which pertains to a milestone payment in connection with an agricultural license agreement. The agricultural applications have the potential to generate regular inflow for the company sooner compared to the cancer therapy applications. The encouraging results in pre-clinical and the clinical trials for cancer treatment have taken away the focus from the agricultural applications. Further, the recent news about the company is also mainly related to the upcoming results of the trials on multiple myeloma. The potential of agricultural applications is underrated. This is especially true if one considers the numerous partnerships which the company has, and the patents it owns. Senesco has agreements with companies like Bayer Crop Science and Monsanto. In November 2006, it had entered into a collaboration with Bayer Crop Science to use the technology on Brassica oilseeds to improve the yield of canola. Its agreement with Monsanto in 2007 enabled the use of Senesco's yield and stress technology on corn and soybeans. Other companies with which it has agreements include Cal/West Seeds, ArborGen and Rahan Meristem. The original discovery of eIF5A was actually in plants, and the human applications were tried because the genetic sequence of eIF5A (Factor 5A) is similar to that of a plant. In any case, the immediate trigger will be the upcoming update in early December on the clinical trials related to multiple myeloma (cohort 3). Positive news will help in building momentum for the stock.
The management had recently expressed confidence about the progress of the trials, and the results will be announced shortly. The stock moved up on slightly better volumes. The company had recently announced that it will make presentations on SNS01T for blood-borne cancer care at the American Society of Hematology (ASH) Annual Meeting which is going to be held early next month. It will present a poster to provide an update on the current results of the trials, and it will also make an oral presentation of new results with SNS01T in non-clinical studies. The results in previous stages were good, and hopefully the results of this phase will also be good on tolerability and efficacy. The preclinical trials on mice, and the cohort 1 & 2 trials results were good both on safety / tolerability and efficacy. The primary purpose of the trials so far has been to test the safety and tolerability. In addition, the trials explore whether SNS01T is an effective treatment for multiple myeloma, mantle cell lymphoma and diffuse large B cell lymphoma. The cohort 3 & 4 trials involve much higher doses so safety / tolerability will be relatively more important. The efficacy is also likely to be better. The company has made efforts to speed up the trials by expansion of centers etc. so that the research can progress faster. Since the culmination of the trial may take some time, Senesco will require to raise more funds from time to time. As per the latest 10Q, Cash & equivalents are sufficient for the operations till March 2014, and it plans to get more funds for its future R&D and commercialization activities by execution of new licensing agreements, and through equity and debt funding. Funding will become easier if the results of the trials continue to show promise.
There have been a few articles recommending to buy IGT, especially after the recent correction in the stock. The results were below estimates, though that was mainly caused by an adjustment needed to set aside more money for income taxes. As mentioned in an article on SA, adjusted earnings per share from continuing operations are up 22% to $1.27 if this factor is excluded. Over the years, the fundamentals have improved consistently. The topline has been growing at a decent pace, and even the bottomline has increased consistently. On a ttm basis, the revenues are $2.34 billion and the net income is $272 million. The deal with Caesars Entertainment (CZR) to supply it with 7,000 video poker terminals is yet to have its full effect on the numbers. The performance of Double Down may also continue to bolster the growth in topline as the social casino segment is expected to grow fast over the next few years. Double Down's online gaming revenue went up 74% to $61 million, and the average number of daily users rose 20% to more than 1.6 million. The social revenues continued to grow at a robust pace, and were up 151% over the past year. The legalization of online gambling in more and more states will only increase the potential. The space is attracting competition, with big and small players like Caesars (CZR) and MGT Capital Investments (MGT) making investments. MGT acquired Avcom a few days ago. Online gambling with real money will lead to good growth in the future, especially as the use of mobile internet increases. The valuations are reasonable as the trailing P/E is 17 and forward P/E is 12.65. This indicates expectations of earnings growth over the next few years. Even the PEG is below one and the price to sales is below 2. The repurchase program may help support the price, but the company needs to keep a watch on the level of leverage.
The losses have increased again, and the situation is not too good. The topline remains stagnant, and the interest payments are rising. This time, the operating losses tripled to $637 million from $216 million in Q3'12. The revenues declined 0.7% on a yoy basis to $2.18 billion. Importantly, the main contributor, the casino revenues, declined by 7.1 percent to $1.466 billion. The net loss jumped by 50.6% on a yoy basis, from $505 million in Q3'12 to $761.4 million in Q3'13. The net loss per share for Q3'13 jumped to $6.03 compared to $4.03 in the same quarter last year. The interest expenses continued to mount, and increased 9.2% on a yoy basis from $515 million in Q3'12 to $563 million in Q3'13. There was a rise in interest payments in the first nine months of the current fiscal to $1.67 billion (compared to $1.57 billion in nine months of fiscal 2012). The declining revenues and increasing losses do not augur well for the financial health. The financial situation is risky, especially if one considers the load of debt. The company was able to raise $200 million in a public equity offering, the largest equity issuance since its initial public offering to improve liquidity, and also expects to generate $420 million in the fourth quarter when it closes the sale of a golf course in Macau. The sector requires capital investments and acquisitions to maintain growth, and enter emerging segments. Caesars had acquired Playtika and, more recently, MGT Capital Investments (MGT) has acquired Avcom in the social casino sector which holds a lot of potential. Investigations by government agencies into money-laundering charges do not help matters at all. The company needs to improve the financial performance soon, and some major steps may be required urgently to reduce the risks.
The earnings were below estimates, but the stock continues to do well. The average price target of the analysts are higher than the current market price. JPMorgan Chase raised their price target for the stock to $30 from 29. Credit Suisse had earlier raised their PT from $15 to $17 with an underperform rating. Analysts predict that Pinnacle Entertainment will post $1.05 earnings per share for the current fiscal year. The stock is still up 90% on a one year basis and 46% on a ytd basis. The company reported an adjusted EPS of 11 cents for the quarter, missing the analysts’ consensus estimate of 32 cents by a big margins. The adjusted EPS in the same quarter a year ago was 30 cents. Long-term debt, including current portion, increased substantially to $4.49 billion from $1.44 billion in Q3'12, mainly because of the Ameristar acquisition. High leverage remains a major problem for Pinnacle and other companies in the sector. Capital investments are high, and acquisitions are required to leverage the growth in emerging segments. Caesars (CZR) & MGT Capital Investments (MGT) have recently acquired companies in the social casino sector which holds a lot of potential. The company had revenue of $418.90 million for the quarter, compared to the consensus estimate of $425.15 million. The company’s revenue for the quarter was up 63.6% on a yoy basis (revenue of $256 million in Q3'12). Consolidated Adjusted EBITDA increased by $37.4 million or 57.5% to $102.6 million. The results included 49 days of contributions from Ameristar, but excluded Lumiere Place Casino and Hotels. Combined Net Revenues and Combined Consolidated Adjusted EBITDA would have been $553.9 million and $140.5 million, respectively, had the results of Ameristar been incorporated for the entire 2013 third quarter instead of the 49 days included in the GAAP results. The full impact of the acquisition will be apparent in the current quarter.
Though the Q3'13 earnings were below analyst estimates, the company did show growth in revenues and improvements in the bottom-line margins. It reported a loss per share of 7 cents compared to estimates of 3 cents. The stock took a dip, but has recovered substantially, albeit on low volumes. The revenue went up by 9.4% on a yoy basis to $2.5 billion. This was better than the consensus analyst estimate of $2.42 billion. The net loss declined significantly on a yoy basis and also on a sequential basis. The net loss was nearly $32 million compared to $92 million in Q2'13 and $181 million in Q3'12. The EBITDA saw good growth and the margins increased primarily based on the performance at MGM China and Las Vegas Strip properties. Debt has remained a big problem for the entire industry, and MGM now expects reduction in the cash interest expense by $220 million. It is also pursuing refinancing options to further reduce the interest costs. FBR Capital Markets, which initiated coverage on the stock recently, was optimistic about the company's prospects despite the fact that earnings were below estimates. It has an Outperform rating with a price target of $25. The analysts see growth prospects in strip EBITDA which totaled just 60% of the peak. Further, the company is positioned to benefit from the ongoing growth in Macau, strip recovery and dividends from MGM China Holdings. The refinancing efforts are likely to improve the bottom-line. Other players are exploring emerging segments. Caesars (CZR) & MGT Capital Investments (MGT) have recently acquired companies in the social casino sector which holds a lot of potential. MGM has shown reasonable improvement, over the last couple of quarters. However, it needs to show consistent improvement over the next few quarters to improve investor confidence. The ttm loss is still very high at $1.34 billion on a revenue of $9.23 billion.
While the lawsuit is moving forward as per schedule with the Markman hearing in June, the company has been making forays into new high potential segments. With the all share acquisition of Avcom, the company has entered into the social casino segment which holds good potential for growth over the next few years. The fantasy sports and online / mobile gaming space, where MGT is building its presences through FanTD and Hammercat studios, also hold a lot of promise. These three businesses are expected to be the real game changers for the company in the long run. The management will need to work hard to build these businesses so that they can start yielding tangible results. The acquisitions so far have been mainly funded through equity issue, and hence the sellers who hold the shares may continue to have interest in the future success of MGT. Even in the case of the Avcom acquisition, the future share based payments are based on achievement of certain revenue metrics. In an article on seekingalpha, the value of this acquisition was put at around $1.5 million upfront (491,000 shares valued at current market price) and nearly $1 million earned-out payments (330,000 shares) over 18 months. Avcom founder will be the GM of MGT Studios managing the online and mobile gaming part. This makes the sellers keenly interested in the future success of the company. It will take time for these three businesses to grow and develop, but it is good that the company has entered into these high potential segments without much cash outflow. Regarding the lawsuit, the seekingalpha article has calculated the value of the share at around $5.10 even if it gets a settlement. MGT's amendment of the complaint in September 2013, to include the potential infringement of Patent '554, has only added to the possibilities.
The 10Q filed by the company for Q1'14 (period ending September 30, 2013) reports that the company received a revenue of $100K which relates to a milestone payment in connection with an agricultural license agreement. The loss during the period was $1.8 million or $0.78 per share compared to $2.7 million or $2.52 per share during the same period last year. The decrease in the loss per common shares was mainly due to decrease in a non-cash loss on settlement of warrant liabilities and decrease in dividends related to preferred stock. Cash & cash equivalents balance as on September 30, 2013 was $789,176, compared to $1,602,294 at the end of the previous quarter ending June 30, 2013. In addition to this, in October 2013, the Company received net proceeds of approximately $1,505,000 from the placement of common stock ($1,725,000 in gross proceeds). This has improved the cash position of the company. The Company plans to fund its future R&D / commercialization activities by using the cash presently available, by achieving milestones set forth in its current licensing agreements, by execution of new licensing agreements, and through equity and debt funding. The filing mentions that the company has sufficient cash on hand to maintain operations through March 2014. Regarding the operations, the management expressed confidence about the progress of the trials. The President of the company stated that the enrollment in cohort 3, where the dose level is significantly higher than cohort 2, is proceeding at a better pace than the previous two cohorts. While the results of cohort 3 are expected to be declared shortly, the results in the preclinical trials on mice have previously yielded encouraging results at this dose. During Q1'14, the company began treating patients at its newly opened clinical-trial site at Seattle Cancer Care Alliance.
On analyst had recently mentioned in an article on seekingalpha that Senesco stock has suffered over the past year 'for no instantly recognizable reason'. He had concluded by saying that the market currently values the company at a discount to its peers, despite consistently positive trial data. Regarding the technology being developed by Senesco, he had said 'the science behind SNS01-T is a revolutionary, cutting-edge approach to cancer treatment, and if proven effective could be applied to a range of other diseases. Upcoming catalysts including cohort three and cohort four results could reverse investor sentiment, and in turn, initiate a market revaluation of Senesco.' The company will announce the results of the trials soon. It had announced that it will make two presentations on SNS01-T for blood-borne cancer care at the 55th American Society of Hematology (ASH) Annual Meeting and Exposition to be held from December 7-10th in New Orleans. The management stated that the company will provide an update on the current results of the trial, and also make an oral presentation of new results with SNS01T in non-clinical studies. Though the FDA approval etc. may take a couple of years, the preliminary results of the trials have been encouraging. If the upcoming results are as encouraging on tolerability & efficacy, then the stock may start an uptrend. It is important to note that the main purpose of the trials so far has been to test the safety and tolerability of the drug, and exploring whether SNS01T is an effective treatment for multiple myeloma, mantle cell lymphoma and diffuse large B cell lymphoma is the second objective. It is obviously good to invest in a development stage company before the stock takes of due to some important event. Many analysts are already positive on the stock, based on expected positive outcome of the trials.
The company announced that it has agreed to acquire Avcom, a New York City based gaming studio focused on building social casino games for mobile devices under the brand Mobile Vegas. The Company expects to issue approximately 491,000 shares of MGT restricted common stock to acquire full ownership of Avcom. In addition, a contingent payment of up to an additional 330,000 shares of restricted common stock is payable if certain revenue metrics are achieved within 18-months. Avcom will operate under the name MGT Studios and oversee the Company's online and mobile gaming properties and digital marketing. Along with the gaming studio, the acquisition brings to MGT a proprietary software platform for secure gaming, mobile development, and sophisticated analytics. In addition, the company also will gain access to expertise in the areas of digital marketing and real money gaming. The Avcom team includes a former IGT lead artist who has designed popular theme based slot machines. Importantly, Avcom also brings over 650K slot machine players from its existing instant win game offerings. The CEO of MGT said that "The acquisition of Avcom, including its leadership team, places MGT in a strong position to capitalize on the popularity of the social casino industry as well as adding tremendous value to our other gaming properties. We couldn't be happier with the exceptional talent that we have added to our team.". The press release also mentions the size and the potential of the social casino industry. A Morgan Stanley research report valued the market at $1.7 billion with the potential to triple by 2015. Social casino has become one of the most profitable social gaming genres, and the success of the segment has been validated by high profile acquisitions by IGT and Caesars for hundreds of millions.
The company will make two presentations on SNS01T for blood-borne cancer care at the 55th American Society of Hematology (ASH) Annual Meeting and Exposition to be held from December 7-10. It will provide an update on the current results of the Phase 1b/2a trial. It will also make an oral presentation of new results with SNS01-T in non-clinical studies. The abstracts to be presented include “Phase 1b/2a Open-Label, Multiple-Dose, Dose-Escalation Study To Evaluate The Safety and Tolerability Of Intravenous Infusion Of SNS01-T In Patients With Relapsed Or Refractory Multiple Myeloma, Mantle Cell Lymphoma, Or Diffuse Large B Cell Lymphoma" and "SNS01-T Exhibits Significant Anti-Tumoral Activity In Models Of Multiple Myeloma and Non-Hodgkins B Cell Lymphoma and Induces Cell Death In Malignant But Not Normal B Cells". The company has been in the news recently mainly because of the expected declaration of the cohort 3 trials. The update in the first week of December and detailed results could be an important trigger for the stock. The stock has shown some signs of a rebound, and it will show strength in case the update / results come in better than expected on the safety & efficacy fronts. The results so far have been encouraging, but they need to be confirmed at higher dosages. Tolerance at higher doses is critical to the usability of the drug. Some analysts have pointed out that the stock is undervalued compared to other development stage companies. The Chairman and one Director has put in money at $26 which is more than 5 times the current market price. Chairman Waksal would not have put in money in the company without being confident about the prospects of SNS01T. The update in early December could provide a trigger for the short term. Long term movement will depend on the company's ability to find funds to support the further trials, and, obviously, the results.
The company has been in the news recently. One of the reasons is that it is going to release the cohort 3 clinical trial results soon. As mentioned by an analyst on SA, good results in the trial could be a strong catalyst for the stock. It could increase investor confidence in the company. Analysts have expressed positive opinion about the future prospects of Senesco, especially in light of its main drug candidate SNS01T. Investments by Chairman Harlan Waksal and Director Christopher Forbes at $26 equivalent in 2012 indicates their faith in company's future. Waksal has a successful track record as a biotech investor, and his investment in Senesco shows that he sees a lot of potential in SNS01T. Waksal co-founded Imclone which he ultimately sold to Eli Lilly (LLY) for $6.8 billion. SNS01T has a unique mechanism of action, and has the ability to modulate Factor 5A, a gene that regulates programmed cell death. The preclinical trial results were encouraging, and results of cohort 1 & 2 (low dosage) in multiple-myeloma patients were good. If the cohort 3 (higher dosage) results show higher efficacy and safety, then there is likely to be a major positive change in the investor outlook towards the company. The drug candidate also has use in inflammation, ischemia, and also in agriculture. The company owns numerous related patents, with applications in agriculture (increasing crop yield), programming of cell death etc. The risks of investments in development stage companies are high, though the rewards are also likely to be proportionate. The company will require funding from time to time to support the trials. Obtaining funds will squarely depend on the progress of the trials. Even if all goes well, FDA approval may take a few years. Competition in cancer field is huge, with most pharmaceutical giants having a strong presence. However, the size of the market does present a huge opportunity for the company.
Alexander Poltorak was appointed as a director in the company. Poltorak was the Chairman and CEO of General Patent, an intellectual property management firm focusing on IP strategy and valuation, patent licensing, enforcement and brokerage. The CEO of Spherix stated that Poltorak's extensive experience in the patent monetization industry will provide valuable governance leadership to Spherix. An article on seekingalpha also mentions that 'Poltorak is a pioneer in this industry and has looked at more patents than almost anyone over the past couple of decades. He has spent his working life focused squarely on the intellectual property business, and his decision to join Spherix is another strong indication of the quality of the company's portfolio.' The author has also mentioned that though it is difficult to value the patents owned by Spherix, the deal with Rockstar and the leadership of Hayes were good enough reasons to invest in this high-risk, high-reward bet. The transaction with Rockstar involved granting ownership of certain patents to Spherix in exchange for shares of Spherix (instead of cash) as well as a share in future profits from these patents. So 'it appears to be a situation where Rockstar is turning the patents over to Spherix who is highly motivated to extract value from them.' Hayes has a successful track record of monetization of patents in many other organizations. The fact that Hayes has joined Spherix indicates that he sees value in these patents. Considering the experience he has in the industry, his opinion or decision needs to be given due weightage. The author mentions that the low float makes the stock extremely volatile. He also mentions that Spherix is just beginning to explore ways to extract value from its patents, and it is difficult to estimate the future cash flows.
The resignation of the CEO has had a severe negative impact. Coming just before the earnings, the impact was exaggerated. The volumes were huge and the stock fell from the higher end to the lower end of its existing range ($36-42) within one session. The earnings did not come in that bad. The revenues were a bit above estimates at $5.1 billion, and the EPS came in at 84 cents. The cash declined to $1.148 billion from $1.245 billion in Q2'13. The management guidance for the full year 2013 is for revenues between $19.7 and $20.3 billion, and the Non-GAAP diluted EPS in the range of $4.95 to 5.05. This confirms a static topline and declining profits for 2013 compared to 2012. A couple of articles on seekingalpha have expressed positive sentiments for the long term future of the company. They expect the company to improve the margins due to the spending cuts. The annual savings are expected to be around $1 billion by end of 2014, and $2 billion by the end of 2017. The stock is expected to reach $50 in 2015 and $60 in 2017. Considering the existing dividend yield, the returns are reasonably good. However, there are stocks with higher growth prospects, and for Teva, there is a huge uncertainty related to the its main drug Copaxone. 2014 & 2015 could be tough years due to declines in sales of Copaxone. The management is confident of doing well with other launches. The stocks owned by Dr. Frost have done extremely well, and he works with his other companies to explore synergies. e.g. he could explore the possibility of Biozone's (BZNE) proprietary drug delivery system QuSomes to help generic drug manufacturers reduce manufacturing costs. The technology is already being tested by OPKO Health (OPK). For Teva, the immediate target is to hunt for a new CEO and assure the investors that all is well.
The stock has done well over the past few months. It has been on an uptrend since May, and has made new 52 week highs last week. Analysts are positive based on the long term potential of the company. The company is aggressive in the marketplace, with improved network experience and range of offerings related to smartphones. The Q2'13 numbers were good, and indicated improvement in some key metrics. The Q3'13 numbers will be released soon, and that will determine the short term trend for the stock. Smartphone sales are expected to be the main driver for increasing the subscriber base and ARPU. The acquisition of MetroPCS is expected to lead to savings of nearly $1 billion. The competition is strong, and more consolidation amongst competitors will make matters difficult. The competition is more cost based so the margins will remain under pressure. The acquisition of Leap Wireless (LEAP) by AT&T (T) could also add to the competition, as LEAP operates in those regions where TMUS operates. One analyst on SA noted that with the increasing demand of high bandwidth, TMUS might face spectrum constraints in the future. This will make it dependent on spectrum auctions and acquisitions. That may increase the leverage even further. With high levels of net debt, and low margins, the company needs to move towards reducing the debt rather than increasing it. Further, Spherix (SPEX), a patent assertion entity, has filed a lawsuit against the company alleging infringement of its patents. For T-Mobile it is critical that the company takes steps to improve the margins. While the whole industry is known for heavy leverage, T-MUS does not have the margins to support higher debt. The MetroPCS acquisition will hopefully improve the operating margins in due course to ease the pressure.
The earnings did not disappoint, and the stock has recovered after a small correction. It has done a nice rebound and is closing in on the recent high of $39. Crossing that will take quite an effort, but if that happens, that will be a positive signal. The company has been doing reasonably well, but the leverage has been increasing. Despite the size of the company, the $75 billion net debt is huge. The recent news about takeover of Vodafone (VOD), albeit in a complex deal, indicates that the management is always open for more M&A. Though this will help in inorganic growth, the leverage needs to be kept in mind. Many analysts have recently emphasized on this weakness of the company. One analyst on seekingalpha stated that AT&T continues to build up leverage in order to please shareholders. The high payout of 120% is not sustainable without it taking recourse to debt. Share repurchase programs also add to the pressure. This may increase the returns to the investors, but ultimately those gains may be lost if the stock price declines. While leverage may be good for creation of new infrastructure, upgradation etc., dividends based on debt are not too healthy. Sale of assets to Crown Castle International (CCI) will help, but the amount is low relative to the debt. Servicing of debt puts pressure on the margins. New and old competitors are getting more aggressive, and increased cannibalization of new smartphone sales by used phones makes matters more difficult. Used phones, which are available through companies like Usell.com (USEL), are likely to cannibalize 8% of new phone sales by 2018. AT&T has taken steps to tackle competition, and acquisition of Leap Wireless is likely to help in the long run. However, analysts are recommending to remain a bit cautious, mainly because of the possibility of even higher leverage in the future.
The earnings were better than estimates for the top line. Even the EPS came in line with expectations. The revenue came in at $58.6 million, up 24% compared to $47 million in Q3'12. The GAAP net income was $8.4 million (up 11%) or $0.16 per share (up 14%). The reaction has been positive, but the stock needs to cross $20 convincingly to start the next leg of the uptrend. It has rewarded the investors well and has appreciated 140% from the 52 week low made in November. The last earnings had led to a correction, and the Q3 numbers are expected to make it stronger. The guidance for revenues in Q4'13 is $60.2 - $60.6 million, and net income (non-GAAP) of $9.2 - $10 million. For the full fiscal 2013, the company expects total revenue in the range of $237.4 - $237.8 million. The net income (non-GAAP) is expected at $52.2 - $53.0 million. This is above the previous guidance issued by the management. Net acquisition spend is expected at $120 - $125 million. Barclays increased their price target for the stock from $18 to $20, and they have an overweight rating on the stock. Zacks upgraded it from underperform to neutral with a PT of $17.90. The consensus rating is buy, and the PT is just below $20. Analysts expect RPXC to post $0.99 EPS for 2013. The cash position has improved sequentially. The sector is buoyant as more and more companies are asserting their patent rights. Several have filed patent infringement lawsuits against much bigger companies, and companies like Marathon Patents Group (MARA) have started to get settlements / licensing revenues. The management guidance indicates that RPXC is expected to continue the growth story. The balance sheet is as strong as ever with zero debt and good cash position. The stock has to cross $20 decisively to get to the next orbit.
The 10K filed for the year ending July 31 reports $109,000 revenues compared to $250,000 for fiscal 2012. This large decrease primarily resulted from decrease in royalty revenues. The Exer-Rest platform unit sales for the 2013 fiscal year increased 57% over 2012, and the royalty revenue decreased due to decrease in product sales by SensorMedics. Importantly, SensorMedics indicated it will discontinue licensed product sales after current inventory is depleted. So the royalty revenue from SensorMedics is expected to be nearly zero. The total operating expenses in FY13 declined to $488,000 compared to $662,000 in FY12. The interest expense increased due to the borrowings under the $1 million revolving credit facility and $50,000 increase in notes payable. The company had $296,000 cash and positive working capital of approximately $47,000 as on July 31. The existing funds are likely to be sufficient to support its current operations in the United States and Canada through July 2014. This implies that the situation has worsened over the last few quarters and has reached a critical point. The stock is up 400% in 2013, and a large part of the move has come after investment made by Dr. Frost in April. So the positive movement is based primarily on the support of Dr. Frost. Frost's investments have done well recently, and he has also put in place some collaborations between his companies. His company Biozone Pharmaceuticals (BZNE), which owns a high potential drug delivery technology Qusomes, has got investments from two other companies OPKO Health (OPK) and MusclePharm (MSLP) where he has a stake. The technology is likely to help the two companies reduce production costs and improve efficacy of the drugs. For NIMU, however, the risk has increased significantly over the last few quarters. The main problem is that it is not likely to generate much revenues in the coming quarters.
The stock has recovered a bit recently, and the volumes have been slightly better. It is up 464% on a ytd basis, and 393% up on 52 week basis. The main reason for the recent buoyancy is the merger with TransEnterix. The merger is expected to change the fortunes of the combined entity, especially in light of the $30 million raised by SafeStitch prior to the merger. The TransEnterix investors contributed two-thirds of this amount ($19.7 million), and Dr. Frost (along with other investors), invested the balance ($10.5 million). The combined entity is financially stronger than how the two companies were individually. Resources are extremely important for companies at the development stage, and backing of Dr. Frost gives confidence to the management. He is on the board of the combined company, and that may help it explore partnerships with others. Frost is known for exploring synergies between his companies. For example, the collaboration between OPKO Health (OPK) and Biozone Pharmaceuticals (BZNE) is likely to help both companies. Biozone owns the high potential proprietary drug delivery technology QuSomes, and OPKO has taken the license to test and use it for commercialization. The merger is expected to help TransEnterix develop its ability to bring flexible minimally invasive surgical technologies to the commercialization stage. The funds will help SafeStitch develop its robotic system SurgiBot and other products. Further, the two companies are expected to have synergies. The expected benefits of the merger will take time to translate into tangible results. The large up move in a short span of time makes the stock vulnerable to corrections due to profit booking. However, the support of Frost can take the stock much further than where it is right now. It may be good to tag along, but with a clear exit strategy in mind. The risks-reward is getting a bit unfavorable.
The company has been posting good numbers consistently. This time the revenues were a bit below estimates, but the earnings per share was better. The cable communications segment continued to grow as the revenues increased by 5.2% to $10.49 billion. The NBC segment revenues declined by 14.2% to $5.85 billion . Within the cable communications part, the TV subscribers declined again, and the broad band subscribers continued to increase. Over the past three years, the TV subscribers have declined from 23 million to 21.6 million, and the broadband subscribers have increased from 17 million to 20.3 million. Within the NBC segment, Cable Networks revenues were up 4% to $2.23 billion, Broadcast TV revenues down 41% to $1,644 million, Filmed Entertainment revenues up 3.3% to $1.4 billion, and Theme Parks revenues were up 7.9% to $661 million. So the broadcast TV revenues business dragged down the top-line for this segment. Analysts have recently expressed positive sentiments about the company. The company's three-year revenue growth is higher than the industry average, and the average dividend yield is also higher. The company can benefit from its expanded partnership with CBS as it is likely to help it retain its existing subscribers and attract new subscribers. The stock has also done well backed by the improvement in fundamentals. The last two years have seen secular growth, and the stock has doubled during the period. The dividend payments have increased over the last few years. It continues to explore emerging high potential segments which can help bolster growth in the long term. It has recently made a small investment in the fantasy sports where companies like Yahoo (YHOO) and MGT Capital Investments (MGT) have put in their money. The stock is a consistent performer and is a good long term bet.
The Q3'13 earnings are going to be released on October 31. That will be an important event which will determine the short term trend of the stock. In Q2'13, the company had exceeded analyst expectations, and hence the stock was able to breakout to new highs. The revenues had increased by 7% on a yoy basis to $2.48 billion. The net loss was $93 million. The stock has doubled over the last one year, and volumes have been consistent recently. The sharp rise makes it important for the company to post good numbers. Negative surprises can lead to some profit booking. Exposure to earnings is always risky so one needs to play based on the risk appetite. If it is able to exceed analyst expectations, then the stock can go much higher. This is because it is at multi-year highs, and there is not much resistance on the way. Fundamentally, it has shown some improvements in the recent quarters, though it is still far away from profitability on a net basis. The level of debt is extremely high which increases the risk. The debt servicing costs make it extremely difficult for the company to improve the margins. The company had $13.11 billion debt on June 30, and the cash was $1.38 billion. This indicates an imbalance because the ttm revenues are $9 billion, and the net loss is $1.49 billion. Comparing with peers can provide some solace, but high levels of debt are always dangerous. Future investments are likely to add the pressure. In another development, a recent ruling in the patent infringement case filed by MGT Capital Investments (MGT) was largely positive for MGT, but it stayed proceedings against MGM pending litigation against some other defendants. A recent SA article mentions that MGM has other drivers which are likely to help the company improve the top line over the medium term.