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Thanks for your reply. It is very difficult to put a timeframe on this. It is linked to prices of precious metals. Once that reverses, a few months will be required to get some confidence. For CDE, if $13 gives way, then the chances of $10 may be high. Frankly, I am just guessing.
You are right. Ultimately, the courts may decide..
Thanks for your reply. You are right.. Prices of the precious metals are the key..
SGMS has recovered after the negative reaction to the results. Now it is trading close to those levels and it seems that the poor results have been brushed aside by the market. Zacks has maintained its neutral rating on the stock with a price target of $9. In the last quarter, the company lost $0.16 per share and the revenue of $219 million was less than the estimate of $227 million. This was a yoy decline of 5%, and a sequential decline of 12%. The company has been posting losses for some quarters now, and the sentiment is not very strong. The acquisition of WMS Industries may be good for the long term but the price paid for that has been questioned by many. The acquisition price of $26 was a 59% premium to the market price at that time. MGT Capital Investments (MGT) has filed a lawsuit against several casino gaming companies including WMS recently. The lawsuit has a potential award of $300 million to $4.5 billion (for all the defendants put together). Contingent risks related to that lawsuit and also the legal costs makes the acquisition price appear even higher. The $1.5 billion paid for the acquisition has increased the debt on books. Shareholders of WMS have approved the acquisition recently. Even WMS did not post a good set of numbers. The merger may be complete by the end of the year and now it is important that the all parts, including WMS start to perform better. The real impact of the acquisition will be apparent over the longer term, and a few good quarters can turn the sentiment in SGMS's favor. Of course, the high leverage will remain for some time to come. So improvement in operational performance will be the key to positive movement in the stock. Further, more information about the lawsuit will also be available in the next few months.
The recent guidance given by the management puts expected revenues for Q2'13 to be between $67.5 and $74 million. The guidance is based on royalties and arbitration awards, and does not include new patent license, technology solutions or patent sale agreements or any new arbitration awards. The guidance includes $43.5 million related to current patent royalties and approximately $24 to $30.5 million related to the favorable arbitration decision in the Pegatron Corporation case received recently. This award may already be factored in the current price. At the lower end of the range, this implies a sequential growth of 42% and a YoY decline of 6%. The impact on the bottom line can be guessed with the profit margin of ~38% on a ttm basis. The key to long-term success of IDCC is its ability to create and acquire more technologies. The acquisition has continued during the last quarter and investments made in BIO-key related security technology may also help in the long term. Revenue impact of these acquisitions are continuous but there is a need for InterDigital to achieve some consistency on this front. Last quarter the company was net negative mainly due to a ~31% decline in revenues. While InterDigital has thousands of patents, there are other companies which work based on single products / technologies and attempt to optimize value of that single technology. PLC Systems (PLCSF), a small medical devices company which recently got several patents for its product RenalGuard comes to mind. There are other stories where single lawsuits have changed the fate of companies. For IDCC, the next few quarters will be important, and a breakout above $50 will be great for the long term. It will signal a long-term uptrend which may take it to highs made a few years ago. Resistances will be there but the present momentum can help it cross soon. Reaction to the guidance will be the key.
The rebound has taken it far, and it is now on course to make multi-year highs. $70 is being talked about, and most of the analysts are bullish on the stock. As the price rises, the valuations will get stretched and there may be some correction. But till that time, it is not a bad idea to tag along, with a stop loss /exit strategy in mind. After the recent results, the stock had crashed from ~$66 to $61 in a couple of days. Lower than expected guidance was the reason for the fall. However, the rebound was equally strong, and Qualcomm is back at those levels. The 52 week low of $53 is far away and the high of $68 (March 2013) is not far away. Now it is up nearly 25% from its lows and the levels made in 2001 are likely to be touched. The volume momentum is not that strong but the strength may be enough to take it to those levels. Its patents are generating 35% of the revenue in the form of license fees and that helps the margins. Qualcomm has a notable patent infringement lawsuit against ParkerVision (PRKR) where things are not exactly going its way. Several other smaller companies are also attempting to monetize the value of their patents. PLC Systems (PLCSF) is a medical device company which is building a patent portfolio with one product RenalGuard. For Qualcomm, the trading volumes need to be watched alongwith news flow related to guidance on margins. Cisco gave a good guidance for the current quarter and the volumes shot up to 200 million shares yesterday. For Qualcomm, the strength is evident from the rebound but drop in volumes may signal a correction. Too many people are getting on the buy side so risk is definitely more than what it was when it was at $61.
AOL continues to be under pressure due to the negative impact of the earnings. Consolidation and grinding could make it remain in a range for some time till there is a significant news flow to help it move out on either side. UBS had recently put a target of $44 on the stock against the consensus of $42. That is about 18-19% from current levels and will require support of the fundamentals to be achieved. The current valuations of the stock are reasonable and a few good earnings may make it come in favor of more brokerages. In the last quarter, lack of sequential growth dampened the sentiments. On yoy basis, the revenues had grown by 2% to $538 million and the net income had grown by 23% to $25.9 million. Cash from operations had doubled. While the short term trend may be flat to negative, the long term picture for the stock may be more positive. This is because the fall has improved the valuations, and the stock is attractive on this front. Future growth expectations are reasonable and company has been delivering on that front now. AOL has done well for investors with good capital appreciation over the last few years and a big one time dividend related to sale of licenses. Several companies are now realizing the value of their patents and the IPR monetizing business is booming. Spherix IP (SPEX) changed its business model to become a full service patent company and now owns several telcom patents also. The good part about AOL is that the expectations generated after the Q1 results have now subsided, and at least it will not have to battle on that front in the next quarter. But any major negative can change the fortunes pretty quickly. Currently, it may just survive after a bit of struggle.
The recent moves has been good. There have been some extremely active days with volumes of nearly 2.4 million. Some website articles have given a target of $4.89 for the stock and considered the moves as a technical breakout. The small dip after the results was bought by traders / investors and things reverted to the trend. The direction depends squarely on the progress of the lawsuit against Qualcomm. So far things have gone in Parkervision's favor with the Markman hearing accepting most of its definitions etc. Qualcomm's motion to drive out Parkervision's claims of indirect infringements was also not accepted. While the net loss increased substantially in Q'13, the positive was that cash and available for sale securities as of March 31, 2013 was $17.8 million, which appears to be sufficient for funding immediate requirements. This amount includes the $14.3 million received upon the recent sale of 4.7 million shares at $3.25. Both these things put together indicate that the targets mentioned are likely to be achieved over the next few weeks. Of course, there is always a possibility of negative surprises in these cases so one has to remain nimble footed. The chip development program of the company continued, and as mentioned in the earnings release, it was awarded 4 US and 5 foreign patents during the last quarter. Patent infringement lawsuits have changed the fate of many stocks with several companies even changing their business model to leverage the boom. Spherix IP (SPEX) changed from a drug development company to become a full service IP company and now owns telecom patents. For Parkervision, the immediate hopes rest on this single lawsuit and it would be great if it can get some revenue generating patents in its kitty. That would stabilize the business model and also help it get a steady stream of revenues.
There has been a spree of lawsuits from Marathon's subsidiaries for its various patents. Relay IP filed a lawsuit against Securities Industry Automation Corporation for patent no. 5,331,637 entitled Multicast Routing Using Core Based Trees. The alleged infringements are for using the accused method claimed in distributing data and/or data feeds via distribution network(s), including but not limited to the National Market Systems distribution network running on the Secure Financial Transaction Infrastructure, which practice the Protocol Independent Multicast-Sparse Mode standard for multicast routing. Relay had also filed a lawsuit against Thompson Reuters for the same patent a few days ago. Sampo IP LLC had filed a lawsuit against Ambit Energy Holdings, BMC Software, HomeAway, Hoover's Inc. and Ristken Software for infringement of patent numbers 6,772,229, 6,161,149 and 8,015,495, each entitled Centrifugal Communication and Collaboration Method. These are the same patents for which two other lawsuits have been filed against Sony, Dell, Siemens, Cisco, HP etc. Further, Marathon had executed its first license and settlement agreement related to the patent portfolio of CyberFone Systems acquired recently. The terms of the confidential settlement and license agreement include a fully paid up license amount and other consideration. There are several enforcements going on for these patents against big companies. It would have been good for the investors had the management declared the terms of settlement. In absence of that, it is difficult to understand the exact potential of the portfolio. The portfolio has generated revenues for CyberFone over the last 18 months, and it is important that the same level of success is continued. About the lawsuits, it is good to see more lawsuits filed for the same patents as this indicates the confidence of the investors like Hudson Bay, Iroquios Capital Group etc. in the strength of the claims. While Markman hearing for these may come up later, the immediate impact on the balance sheet will be through the licensing revenues. Hopefully more information comes out on this front.
Breakout is an understatement. The volumes were in excess of 200 million (~6 times the averages). The next levels to watch could be $27 and $30 after that. Though it may not be that easy, the momentum can take it to those levels. Earnings were better than estimates, and analysts were happy at the management outlook. Cisco mirrors the sentiment in this sector, and the fact that management expects a slow but steady economic environment has helped build the positivity. The management stated that there were some good signs in US and other parts of the world. Earnings beat estimates, and even the guidance was more than the expectations. Revenues came in at $12.2 billion (up 5.4% from $11.6 billion on yoy basis) and net income increased 14.5% from $2.2 billion to $2.5 billion. The EPS also increased by around 15% to $0.46. There was due emphasis on innovation in the press release with the company highlighting its new services / products. IPRs are important assets for any company now and small companies are filing lawsuits for infringements all the time. Recently, Marathon Patents Group (MARA) has filed a lawsuit against Cisco and several other tech giants for infringement of its patent rights. Now that the breakout for Cisco has happened, investors can tag along this giant but with a strategy in mind. However, expectations will now be high so exposure can be reduced before the next earnings, or if it is able to reach around $30. At those levels, a lot of future may have been factored already. But that level is pretty far away now. A risk taker can obviously attempt to take advantage of another breakout after the next earnings (though that will be quite risky). If one believes in the long term story, then one can stay invested as a long term player. Corrections, can be bought, but with a stop loss depending upon the risk appetite.
Has to break out above $0.50 now. Thanks..
Unfortunately, it moves on sentiment. Otherwise, it is a great stock. Profit margins are Wow. Thanks.
You have a much deeper understanding than me about the business.. That is for sure. Thanks a lot.
Thanks.
Yes, maybe you are right..Thanks.
Thanks it was a good article.
I read on SA maybe. They had given a figure of $129 million. If you google, you can see that. Thanks.
There are some reports which indicated that Apple's lost a bit of market share in the high end smart phone market. These reports are not good for the stock which seems to have resumed its fall after hitting $465. The rise from $385 to this level was surprising as it was after bad results. Surely there has to be a reason for the reversal (profit booking maybe), but it is likely that the movements may get more random and volatile over the next few weeks. The question is, where could this stop now. The recent lows should provide good support, but how long will they hold is another matter. Apple is facing slowing growth, lower margins, diminishing hopes on a new product and has lost market share. In addition, there are lawsuits like the case for e-book conspiracy where Apple did not settle with the US government, whereas the book publishers did. The allegations read that Apple conspired and agreed with the 5 publishers for the purpose and with the effect of raising consumer e-book prices and restraining retail price competition. Further there are patent infringement lawsuits where Apple is a party. This booming sector has news all the time with Marathon Patents Group (MARA) filing another lawsuit against HP, Cisco, Alcatel-Lucent etc. for the same patents against which their case against Sony, Dell, Siemens etc. is pending trial. Apple recently indicated that it will contest VirnetX (VHC)'s claim of $368 million in another suit. All these factors do make it difficult for the stock to show much strength in the near future. Most probable scenario is that the stock may remain suffocated in a reasonably large range for quite some time unless the lower end breaks due to some negative news flow. The upper end will not be easy to breach as $480 odd levels are pretty far away, and there may be several resistances on the way.
There was no mention of Glass in the I/O conference. Several were improvements, some small, some not so small. Expectations from the conference and also the amazing momentum was able to carry the stock over 900. The volume was nearly 4 million shares compared with the 3 month average of 2.2 million. The valuations are not an issue right now, and technically it is at a new level all the time. So the stock has to be given due respect. Forget that it is 6 times sales, 4 times book and 27 times earnings. There are more expensive stocks trading even more confidently. It will be good to see whether Google can go to $950 or even $1000 before there is some fatigue. Yesterday's volumes, and Apple's reversal (not related) over the last few days indicates that Google is definitely a favorite of many investors and traders. The overall performance of the S&P and the other markets in the world is also adding to the positivity. The approaching launch of Glass will maybe add to the euphoria. Polishing of its existing products / offerings like Google Play Game Services, Google Play Music, Maps for Mobile etc. will only add to the shine. The desktop version of Google Maps is getting an overhaul, and Voice Search on the Desktop through Chrome will increase users and make them spend more time on Google services (increase in ad value). On the other side, there was a ruling in a German court ordering Google to respect requests to remove autocomplete entries from its search bar in Germany if they are defamatory. The patent infringement lawsuits will keep increasing as that seems to be a business model. e.g. MGT Capital Investments (MGT)'s $4.5 billion lawsuit against gaming companies. For Google, surely, there may be a several more days of this uptrend. It is best to keep tagging along with stop losses at crucial supports, and make the most of the party. Only, don't get carried away.
Thanks for your reply. I though $900 would be good. But now I just do not know. Maybe $940. I suggest whatever one does, one should remember to jump of the train if things change decisively. Trailing stops will be good.
Fall in prices of precious metals have crushed stocks of all gold and silver companies. Most are trading at a discount to book value, and several are below the 2008 lows. Coeur is trading at 0.57 times book value per share and is down by 60% from its 52 week high of around $32. It is trading at a forward P/E of 7.79 and the price to sales is also 1.65. While all this may appear attractive in isolation, the gloom over the entire sector has made the analysts extremely bearish on these stocks. Almost all stocks are trading at crucial support levels, and a break may take them further back in time to much deeper levels. For CDE, the restructuring may help in the long term, but the immediate future of the stock does not look too good. The profit margins are likely to remain under pressure as the guidance given by the management talked about higher operating cost for silver ($9.50 to $10.50 per ounce) and lower realizations from gold with lower price outlook of $1500 per ounce. The guidance for production in 2013 was 18 million to 19.5 million ounces of silver and 250,000-265,000 ounces of gold. In Q1'13, it had sold 3.1 million oz. of silver and and 51,926 oz. of gold. CDE had recently invested in various properties including development stage companies like Pershing Gold Corporation (PGLC). While Pershing is expected to start production in 2014, other investments in such gloomy times are also likely to bear fruits when the sentiments reverse. It recently acquired Orko Silver / La Preciosa silver deposits in Mexico for $99.1 million. The La Preciosa has 99 million ounces of indicated and 140 million ounces of inferred silver resources. For the short term, the silver prices have to show strength, and only then can one expect a phase of consolidation and grinding before the stock starts to move up.
The fall is gathering momentum and the stock is dangerously poised at $5. Importantly, these levels are below the 2008 lows, and the stock has gone back in time to 2005-06. A break below $5 may take it much lower to 2000-01 lows which are far away. Though the gold prices have not shown any sustainable strength, it seems that the correction is getting overdone. There are worries on various fronts, but the fact that all such stocks are trading much below book value appears to be a little too much. Analysts are bearish on the stock, and Kinross is trading well below the analyst price targets between $6 to $10. The increase in stake in Revolution Resources (TSE:RV) at $0.07 per share indicates that the management may be acquiring low priced assets in these gloomy times. Development stage company Pershing Gold Corporation (PGLC) is expected to start production in 2014, and is currently looking for strategic investors. There are other similar assets which may give fantastic returns if the gold prices show signs of strength. The problem for Kinross is aggravated by the legal issues related to its properties in Mauritania and Ghana. The $3.2 billion impairment charge was a major blow which increased the momentum of the downtrend. Kinross gold has assets in Ecuador (Fruta del Nortel project) where the reserves are estimated to be around 6.7 million ounces of gold and 9.0 million ounces of silver. One can hope that the crucial 52 week low holds and there is a bounce from current levels. If the sentiment worsens, then one could be in for more pain and gloom. With S&P making highs all the time, such excessive pessimism seems to be misplaced. Fundamentally, the stock is trading at 0.61 times its book value per share, and 1.4 times sales. While this may look okay in isolation, the prevailing sentiments paint a different picture.
The earnings are out and there has been some disappointment on the front. The EPS was below estimates, and the gold prices have remained under pressure. Sequentially, there was a 39% decline in net income and 30% drop in revenues. The EPS was $0.38 which was below the Zacks estimates of $0.41. Compared with the $0.54 in the previous quarter, this is a drop of nearly 30%. The stock did not react that bad immediately, but has had a bad day yesterday. The 5% fall was accompanied by a high volume of nearly 9 million shares (10 day average of 6.3 million). The management maintained the guidance for the year, but it remains to be seen how it will be able to achieve the figures. Goldcorp is now nearly 45% below its 52 week high of $47.42, and is at crucial support levels. If $27 gives way, then the cut could be much deeper. The entire sector looks weak, and the gloom seems to be intensifying. However, with most stocks trading at book value, and if the gold prices show a reversal, this could be a good time to take a position for the long term. Some development stage companies like Pershing Gold Corporation (PGLC) are trading at very low valuations. Pershing is about to start production next year (expected production of 50K ounces). Long term debt on Goldcorp books has increased to $2.45 billion and cash is around $2.02 billion. This is an increase from $783 million and $972 million respectively reported for December 31, 2012. The liquidity may come in handy for strategic acquisitions or for helping the company in bad times (if gold goes down further). However, the liquidity seems to be funded by debt. Times are not good, but investments with long term horizon at these times usually lead to good returns. However, gold prices have to stabilize before there is any change in sentiments.
The news flow has been missing. This is reflected in the low volumes over the last few days. Usually, quiet periods are the best times for stocks to consolidate and prepare for the next move. News was expected from WMS Industries (WMS) regarding the settlement, and also there were reports of the case management conference on the patent infringement lawsuit. Whenever there is some development on this front, things will change for the stock. The case management conference will help discuss dates for a settlement conference, completion of discovery, motions, the final pretrial conference and trial. Further, a confidential settlement memorandum will be required from the parties. These are steps in the process, and will lead to more clarity regarding the possibilities. Acquisition of FanTD LLC is expected to help the company get operational experience of online / mobile gambling and the sports wagering business. News on the closure of the deal and more details about the financial projections of the business are also expected soon. The numbers will help investors understand the true potential of the business, and it is very important that the management explains the details. All these expectations may keep the stock reasonably strong and active. However, one has to be prepared for intervening volatility and take appropriate action depending upon ones risk appetite. A Seekingalpha article had given a target in excess of $17 for MGT in October. This was based on the performance of other plaintiff company stocks involved in patent infringement lawsuits. That may be a very steep target, but such things have been known to happen. Perhaps, if the FanTD venture succeeds, that would be the bigger positive for the long term success of MGT. This would change the business model, and also make analysts / investors view the company differently as compared with pure patent plays.
The recent results have not done much for the stock. While the CEO marked it as a “transformational quarter for Unwired Planet” the financial results were not too great. The net loss increased slightly. As per the CEO, "We are now executing a completely focused licensing strategy as a long-term industry platform for the realization of our intellectual property value across 2G, 3G, 4G technologies as well as cloud-based mobile applications and services. With the completion of the patent transaction with Ericsson, we have begun actively engaging priority licensing targets and are working closely with our partners to proceed in the most efficient way to enhance shareholder value." While this statement indicates the company's desire to leverage its technologies for getting more revenues, it seems that the impact on the actual numbers may not be immediate. The attempt to patent and license / monetize its technologies is the focus area for UPIP, and the patent transaction with Ericsson (ERIC) (zero cash up-front payment) was a step in this direction. As per the deal, for the first $100 million earned in revenue by Ericsson, Unwired will get 20%. More and more companies are attempting to monetize their technologies for enforcing their rights. MGT Capital Investments (MGT) has a multi-billion dollar patent infringement lawsuit going against several gaming companies. MGT also has entered in the highly potential sports wagering / online gambling business by its acquisition of FanTD LLC. For UPIP, recent successes in monetizing / licensing by other small companies should provide encouragement. The net loss of $12.2 million for the last quarter contained $4.47 million related to stock-based compensation. With a high accumulated deficit, it is important that the revenue inflows start sooner rather than latter. The stock is at crucial supports supports, and it is possible that it remains range bound for some time before there is a break on either side.
The company got its first patent from the European Patent Office for its main product RenalGuard recently. The company already has several US, Canadian and Japanese patents for the product and more are likely to follow. This latest patent covers the core RenalGuard device, and its redundant infusion rate monitoring which allows RenalGuard to safely infuse saline at very high and accurate rates. The patent will be valid till April 2027. Europe is a key market for the product and it was important for the company to protect its rights in the market. Management termed it as an important milestone in the history of RenalGuard, and expects it to strengthen its IPR position for the product in Europe. In February 2011, the company had sold CO2 Heart Laser System, its other product to Novadaq Corp in a deal worth around $1.6 million. That product was used by cardiac surgeons to alleviate symptoms of severe angina. Sale of the product was done mainly to enable PLC Systems to concentrate solely on RenalGuard. This product is designed to remove contrast dyes that are potentially toxic to patients with impaired kidney function. These dyes are infused for investigation procedures. The investigator-sponsored clinical trials of RenalGuard in Europe have been encouraging and the next trigger will be the success of the trials in US. The company is trying to expand its distribution network across the world with presence in other countries. In case the trials in US progress as expected, then that will be a huge market for the product. Currently Europe is the main market for the product. In any case, the value of the RenalGuard technology and the patents will increase with success in the trials, and as more and more patents are obtained. Recently, several companies have made it big by monetizing their patents. PLC Systems may reach that stage soon, and a detailed report on Zacks has given a price target of $0.35 for the stock. Hope the product lives up to its promise.
The stock has been a highly overvalued stock if one looks at the P/E ratios. However, these companies (including Facebook) are known to trade at such valuations. The question is whether this should be taken as a new normal or one should become careful. The fall from $200 to $175 in one day (volume of 11 million shares) should surely have some alarm bells ringing. Even after that, the fall is not nearing any support, and it seems that the short term bottom is still far away. The mangement guidance for a 5-6% revenue growth (sequentially) did not help the stock at all. However, the first few years of this stock are likely to remain volatile, and some smoothing of the curve may take place after that. Perhaps the initial price was a little too high, but those who invested made some money. Those who bought recently may be in for a waiting period to recover. The present EPS of $0.26 (ttm) will need to multiply several times in the next few quarters for the valuations to become reasonable. Facebook has even higher valuations but that stock has not done much for the investors. The market cap to sales ratio of LinkedIn is in excess of 17 and the price to book ratio is nearly 20. If one considers a net margin of less than 4% all this seems very high. LinkedIn will also continue to face patent infringement lawsuits like other big techies, and has to remain careful of unintended violations. With the IP monetizing business growing strongly, smaller companies are concentrating on optimizing their portfolios / proprietary technologies. One medical device company PLC Systems (PLCSF) sold its other products to concentrate on one product RenalGuard for which it was able to recently get European patents. For LinkedIn, the next few quarters will determine whether the valuations start to become attractive.
Very soon we will be at the first anniversary of the listing. Nothing to celebrate for the investors. Those who sold at listing were the luckiest, but not many of those would be retail investors. The recent earnings could not do the trick as sequentially there was some decline in revenues. Even the other earnings declared in the last one year were almost random. The share-based compensation increased from $100 million to $170 million yoy in Q1'13. The offer price did a world of good to Facebook and the investors were left with a stock that had peaked before listing. The stock may do well over the years with increase in mobile devices ad revenues, but for the time being things do not look very promising. The $31 levels have never been crossed after the listing. The euphoria about the website could never translate into the stock price. Surely they have a plan to get users to spend more time on Facebook on mobile devices but that transition will not deliver results immediately. The brand value of Facebook will help it increase revenues but the acquisition costs may make the margins erratic. There was news that it is probably going to acquire mobile-driving application Waze in a deal worth nearly $1 billion deal. Waze is used by nearly 50 million users, and is crowd-sourced and ad-supported. The potential of the mobile users segment is huge and Facebook reported a 54% growth YoY in Mobile MAUs (751 million). This compares with nearly 23% overall growth in the MAUs to $1.11 billion. Mobile advertising revenue was 30% of the total ad revenue. Facebook, like many other big tech companies, is also faced with infringement lawsuits (by Bascom Research). There are several patent infringement lawsuits going on and smaller companies are taking on the biggies all the time. Marathon Patents Group (MARA) recently filed two such, potentially huge, lawsuits against the likes of Cisco, HP, Alcatel-Lucent etc. Facebook has to remain conscious of unintended patent violations.
A recent article on beta.fool compared Cisco with IBM and Intel, and ultimately tilted towards Cisco as a preferred long term bet. The growth over the last 3-4 has been comparatively better and the revenue / margin growth over 2011 was the best for Cisco. Growth in the price of Cisco has been good. Over the last one year it is up by more than 26% and its is up more than 40% from its 52 week low of around $15. The valuations remain reasonable and the ttm P/E is 12 with the forward P/E being 10. The PEG is also reasonable indicating that the market does expect reasonable performance from the stock over the next few years. In 2012, the margins were ~17.5% (~15% in 2011). The growth in revenues is likely to continue provided there is increase in spending by the governments and private businesses. At present there are expectations of moderate recovery and hence the revenue growth is not expected to be too robust. The recent ruling by a court in the patent infringement lawsuit filed by VirnetX was in favor of Cisco, and that is a definite positive for the sentiments. IPR portfolios have become extremely important assets now with companies attempting to optimize the value through enforcement of licenses / filing such lawsuits. Several instances of small companies taking on big tech firms are currently in news. Companies like Spherix IP (SPEX) which is backed by Hudson Bay Capital / Iroquois Capital Group, changed its business model to become full service patent company and now owns telecom patents. Cisco, however, has to remain careful of unintended violations and should tread carefully. Big companies have been known to suffer on this front due to complacency. For Cisco, the next trigger will be the earnings / business outlook / guidance (May 15). That will determine the short term price movement of the stock.
The Q2'13 result & guidance for the next quarter led to a crash in the stock, but there has been some recovery since then. Several analysts are bullish on the stock based on its fundamentals and competitive position. Qualcomm is up by more than 20% from its low in July last year. Despite this, the valuations are decent and the P/E is around 18. The forward P/E is around 13, and the PEG is 0.78 indicating reasonably strong expectations from the market about growth. High price to sales has to be looked in conjunction with a high net margin of ~29%. It has insignificant debt on books, and had around $13.49 billion cash on books as on March 31. The Q2 results were not totally comparable on a YoY basis as last year there was an abnormal after tax gain of $761 million due to sale of spectrum. On a sequential basis, the margins showed some contraction but the guidance for Q3'13 shows expectations of some stability on this metric. For the full year 2013, the guidance indicates that the margins may contract with expected revenue growth being much higher than the EPS growth. There was some bad news on the lawsuit against Parkervision, but more clarity on that will emerge only after the trial progresses. The IPR monetizing is now a business model in itself. Companies like Spherix IP (SPEX), which owns telecom patents, have changed their business model to leverage the growth story in the segment. For Qualcomm, the strong demand for wireless chips should keep the fundamentals upbeat. The growth in smartphone sales, especially in the emerging markets, has been great. The patents and royalty generating licenses of Qualcomm are also going to keep the margins at decent levels. The future looks bright and margins will be a key metric to watch.
The analysts were expecting some sequential growth in the earnings, and AOL was not able to deliver on that front. This led to a sharp correction, and now the stock is trying to recover. Goldman Sachs (GS) has increased the price target for AOL from $35 to $39 but maintained its neutral rating. GS expressed its confidence that AOL would accelerate growth in the second half of this year in the brand and ad tech businesses. Considering the progress being made in the cost rationalization it rated the stock as fairly valued. On a YoY basis, the results were not too bad. Revenue was up 2% to $538 million and the net income rose by 23% to $25.9 million. The earnings per share grew from $0.22 in Q1'12 to $0.32 (45% rise). The cash from operating activities increased from $19.9 million to $40.6 million (104% rise). On a QoQ basis, the revenues declined by 10% from $599.50 million in Q4'12 and the net income declined by 27% from $35.70 million. The fall after the earnings was on heavy volumes of nearly 4 million, but yesterday's recovery was also with decent volumes of 2 million shares. The next earnings better be good otherwise the damage may be more lasting. The investors have been rewarded in the last two years by more than 100% returns, and the dividend related to sale of licenses. Many small companies are also trying to optimize the value of their proprietary technologies through patenting / licensing / monetizing. A small medical device company PLC Systems (PLCSF) sold its successful product heart laser to concentrate on RenalGuard, a product it thought had more potential. PLCSF has subsequently been able to get several US and European patents related to the product. For AOL, the next few days will determine the short term movement of the stock. A probable scenario is that the stock may continue in a small range and consolidate before the next news flow / earnings.
The earnings were released and the net loss increased substantially. In Q1'13, the net loss was $6.5 million compared with $4.1 million in Q1'12 (58.5% increase). The loss per share also increased from $0.06 to $0.08 during the same period. The increase was mainly due to increase in legal fees of $0.9 million and $1.4 million increase in non-cash share-based compensation expense. The company used more cash during the quarter ($5 million) than that used in Q1'12 ($3.4 million). Investment in patents / other long-lived assets was $0.2 million and rest of the cash was used in operations. Cash and available for sale securities as of March 31, 2013 was $17.8 million which included $14.3 million received upon the recent sale of 4.7 million shares at $3.25. The cash on books appears to be enough for the next few quarters. Importantly, the management commented on the Qualcomm lawsuit stating that there was significant progress and they remained confident of success. The company continued its chip development program and was awarded four new U.S. and five new foreign patents during the quarter. The impact of the earnings on the share price will be known over the next few days. It is possible that there is a correction to lower levels and after that the expectations regarding the lawsuit will again determine the future course of the stock. Many companies concentrate on one patent / technology and try to optimize its value through licenses and lawsuits. A medical device company PLC Systems (PLCSF), for example, sold its product heart laser in 2011 to concentrate on one product Renal Guard for which it has received several patents thereafter. The Markman order in the Parkervision trial in February was largely in favor of the company, and that set the tone for the positive uptrend in PRKR. Hopefully, after a dip, things will become more positive.
The seekingalpha article yesterday mentioned some developments & possibilities in the patent infringement lawsuit filed by MGT against casino gaming companies. The developments relate to the case management conference and the expected news regarding settlement from WMS Industries (WMS) or Scientific Games Corporation (SGMS). US Magistrate Judge of the Southern District of Mississippi has ordered a case management conference with all parties (defendants and plaintiff) to discuss dates for a settlement conference, completion of discovery, motions, the final pretrial conference and trial. The parties are also requested to submit a confidential settlement memorandum to include brief explanation of the case and a candid appraisal of the respective positions, possible settlement figures, good faith estimate of the expense of carrying the litigation through trial and the appellate process, if not settled. Further, the merger between WMS and SGMS is going to shareholders' vote tomorrow and it is possible that there may be some news on the settlement. If there is some news on the settlement, that may be a huge positive for the stock as any settlement may lead to more such settlements by other defendants. SGMS would like to get rid of the overhang before the merger, and even WMS would like to decide on the matter. In any case, cost of the lawsuit will be a burden on the combined entity. Whatever the case, there is likely to be some news flow over the next few days which may help improve the understanding of the events in the near future. Further, the efforts of MGT to strengthen its business model may also help in changing the way it is perceived. Effect of acquisition of FanTD LLC will be visible over the next few quarters, and it is expected that revenue flows will become regular. The stock, meanwhile continues to show strength as it has been trading above important levels.
The stock has moved 13% in less than a month and the results have made the stock enter unchartered territories. Now every high is a new high and all levels are new levels. Technical strength is okay, but the fundamentals are looking a little stretched. High P/E of 26 and an high price to sales makes the stock a little vulnerable to corrections. Having said that, markets seldom move on fundamentals in the short-term and it is possible that we may see $900 and beyond in a runup to the next earnings or the launch of Glass. Apple's fortunes changed in a few months, and now, after poor results it has gone up by 22% in a few weeks! But what is certain is that future innovation and success is increasingly being factored in the stock price of Google. Apple bashing seems to be getting over, and there are higher risk-reward plays in the market. Then there is also the overhang of so many lawsuits especially the ones in EU and UK. Plus, the patent infringement lawsuits against some companies. These lawsuits are only increasing with companies filing multiple lawsuits for the same patents e.g. Marathon Patent Group (MARA) filing a new lawsuit for its patents against new companies (HP, Cisco, Spring Nextel, Alcatel-Lucent etc.). So the pitfalls are there and a trailing stop loss seems to be a good way to play the stock. Or one can decide a level which will have perhaps factored all the near term positivity. Or maybe sell before the launch of Glass or any other major event. It is quite possible that the stock may correct if there is any failure from Google on any of these fronts. A correction like that of Apple may be a little difficult but one can never be too sure. It is best to at least get a little cautious.
A recent report from Morgan Stanley indicates that Apple may be closer to launching the cheaper version of iPhone than most think. A version may be out as soon as September. Most probably it will be launched in price conscious markets so that there is no dilution / cannibalization in the US / European markets. It will be interesting to see how the management is able to maintain the difference in positioning of the products. Brand image dilution is possible, and some buyers may move to other products to avoid association with the lower priced positioning. This is a plunge which Apple has to take anyway. Careful marketing may reduce the damage, but some dilution of brand strength is definitely going to be there. Cannibalization (like iPad mini) will also hurt the sales of higher margin products. A lower end phone may not solve many of its problems. It may increase sales at the cost of margins. So the way forward seems to be innovation. Even Einhorn said this after he expressed his satisfaction on the $100 billion buyback. Einhorn has won the battle, but for Apple to win, some fantastic product has to emerge. Lawsuits against big companies are also on the rise with Apple deciding to contest $368 million claim of VirnetX. Cases like MGT Capital Investments (MGT)'s $4.5 billion lawsuit against casino gaming companies are getting closer to the Markman hearing / settlement. Apple stock has meanwhile climbed 20% after poor results and has overcome hurdles with ease. The stock which was beaten down to pulp due to poor fundamentals has rebounded after the worst results in recent times. Even the buyback may cease to have any impact after a while. As mentioned in a seekingalpha article, the 20% rise in market cap over last three weeks has already factored half of the buyback. Ultimately, margins and revenue growth will remain the key to long term performance.
The recent article on seekingalpha.com has given a thumbs up to Silver Wheaton. The analysis ultimately concludes that the stock has relatively lower risk due to its business model and the diversity of its assets. The analyst has recommended an overweight stance if the stock corrects to $22. This level is the 52 week low made by the stock. It has since bounced by 13% from those levels, and is looking relatively stable. Other companies in the sector have shown stronger rebounds. Many have bounced from levels which were close to the lows of 2008, and a much deeper cut has been avoided. Of course, the fortunes may change pretty quickly if the silver goes into another leg of decline. The most likely scenario is that the stocks my consolidate at current levels and remain in a range. Lower levels can be bought, but one has to remain careful with a stop loss in mind. The good part is that too many analysts are now bearish on the sector. This is usually the best time to start becoming positive. For Silver Wheaton, the price targets of these analysts are significantly higher than the current levels (e.g. Credit Suisse PT of $38). This is because the high margins, and low risk business model of Silver Wheaton makes it a preferred bet in the current scenario. It is a near zero debt company with $778 million in cash. With depressed prices of stocks, especially of development stage companies, it may be good time to invest in some silver / gold assets. Companies like Pershing Gold Corporation (PGLC) (likely to start production in 2014) are looking for investors to fund their endeavors. Contracts may be available at good terms. Silver Wheaton can look for such assets in the Silver sector. The company has maintained its growth and it remains to be seen what happens in the next earnings.
Franco-Nevada stock has bounced by more than 27% from its recent lows. The valuations appear a little stretched with a high P/E in excess of 60 and price to book ratio of 2. The price to sales ratio is nearly 15. This is at a time when many of the gold companies are trading at a discount to the book value. The development stage companies like Pershing Gold Corporation (PGLC) (likely to start production in 2014) are available at even cheaper valuations. In the earnings released for Q1'13 a short while ago, the management maintained the guidance for 2013 and expects a total of 215,000 to 235,000 Gold Equivalent Ounces from its mineral assets, and $55 to $65.0 million in revenue from its oil & gas assets. However, high valuations are not supported by the earnings for Q1'13. Though the company showed a 3.6% growth in revenues to $108.8 million ($105 million in Q1'12), the net income declined by around 25% to $35.4 million (from $46.8 million in Q1'12). QoQ, the revenues dropped by 4.6% from $114.1 million in Q4'12. In Q4'12, the company had reported a net loss of $33.1 million (after unusual expense of $82.70 million). In addition, the loss in “other comprehensive income / (loss)” in Q1'13 was $29.7 million which was mainly due to currency translation adjustments. This loss may be transferred to profit and loss account later (as per accounting standards). In Q1'12, there was a profit of $24.1 million under this head. Thus, the results showed that margins have contracted and the valuations are becoming a little high. 85% of the revenue was from precious metals (mainly gold – 71%) and the oil and gas assets contributing most of the balance. 33% of the revenues came from Canada, 24% from US, 21% from Mexico and 4% from Australia. The company improved its cash position from $779.9 million as on December 31, 2012 to $825.8 million as on March 31, 2013.
Last quarter, Barrick had reported a decline of nearly 6% in revenues and 18.5% decline in net income. The contraction in margins is a worry but that is how the whole sector is performing. The stock prices are showing some strength and moving in tandem with the gold prices. The stock is up nearly 23% from the recent lows of $17.51 made on April 17. The bounce is gaining strength, but the possibility of a reversal cannot be ruled out. Based on the increased volumes, it seems that the bounce may be good for another 5-10%, and after that the selling pressure may come in. However, if the gold prices support, this moderate level of strength may continue. Most probably, the recent lows will hold even if there is a correction. On the upper side there will be selling. Thus, Barrick may be in for a long phase of consolidation which is directly dependent on the performance of gold prices. That is how the sentiments are playing, and unless there is some improvement in margins / revenue growth, the prices may remain in a range. Despite the recent bounce, the stock is still trading below its book value. The cash on books is $2.34 billion compared with a debt of nearly $14.80 billion. The high debt-equity ratio is another negative for Barrick. There are other stocks in the gold /silver sector which are available at low valuations and the stock movements have again been in direct correlation with the gold prices. Development stage companies (like Pershing Gold Corporation (PGLC) which is about to start production in early 2014) are available at even cheaper valuations. The gloom is widespread and several analysts have reduced the price target of stocks from this sector. Usually, it is a good time to buy when all are bearish on some sector. If one prefers Barrick, one can at least hold with a trailing stop loss. Recent lows have be a strict stop loss.
MARA is a making efforts towards becoming a more balanced business model by acquiring revenue generating patents. Marathon's subsidiary TQP Acquisition Corp recently acquired foundational data encryption patents and Marathon acquired CyberFone Systems, LLC and its patent portfolio related to specific transactional data processing, telecommunications, network and database inventions, including financial transactions. The steady stream of revenues from these already successful licenses / patents will strengthen the balance sheet of Marathon. The enforcement efforts have also gained strength with its subsidiary Relay IP filing a patent infringement lawsuit for U.S patent number 5,331,637 against Sprint Nextel Corporation, Juniper Networks, Cisco Systems, Allied Telesis, Bloomberg L.P., TIBCO Software, D-Link Corporation, Avaya, Hewlett-Packard Company, Enterasys Networks, Extreme Networks, BT Group, SAVVIS Inc., Zhone Technologies, Huawei Technologies, Hitachi Cable America, and Adtran. Its subsidiary Sampo IP LLC filed another lawsuit in the United States District Court in the Eastern District of Texas against ETrade Financial Corporate Services Inc., Liberty Mutual Group Inc., Aetna Inc., Avon Products Inc., Starbucks Corporation, Yum! Brands Inc., Hewlett-Packard Company, and Alcatel-Lucent USA Inc. The lawsuit is for the same patents (numbers 6,161,149, 6,772,229, and 8,015,495) for which infringement was filed in March 2013 against Sony, Dell, Siemens etc. The Markman hearing for the lawsuit is scheduled in October and the stock is already buzzing with activity. Another lawsuit for the same patents indicates that the investors Hudson Bay, Iroquois Capital Group and Barry Honig etc. are extremely confident of the the strength of MARA's claims. So there have been improvements on several fronts and the possibility of improved performance from the stock has increased. Based on experience of the stock performance of plaintiff companies in such lawsuits, it is expected that Marathon could even deliver triple-digit returns in the next few months. However, this is subject to closure of the acquisition deals and also positive news flow related to these lawsuits.
Things are quieter now with VirnetX trading around $20. It appears to be stable but the confidence is still missing. This is mainly because the company is heavily dependent on the outcome of its complaint / lawsuits against Microsoft (MSFT) and Apple (AAPL). The Cisco (CSCO) verdict has shaken the company, and there are talks that it may file a new lawsuit to make another attempt at getting the damages / royalties etc. About Microsoft, the complaint filed is for infringement of patent rights by Skype products. Microsoft had signed an licensing agreement for these patents with VHC but that was before it acquired Skype. About Apple, the fact that it is contesting the $368 million claim is also not good news for VirnetX. Thus, there is little positive news expected, and the stock may remain subdued at around the current levels. Of course, it is highly sensitive to news flow and things can change from positive to negative or vice-versa pretty quickly. Marathon Patent Group (MARA), which has been in news for its patent infringement lawsuit against Sony, Dell, Siemens etc. has now started acquiring revenue generating patents of other companies to balance its business model. Marathon acquired CyberFone for getting its patent patent portfolios which has been generating millions of dollars in revenue. Such acquisitions strengthen the business model as there is a steady stream of cash. Marathon continued to file more infringement lawsuits for other patents against the likes of HP, Cisco, Alcatel-Lucent, Bloomberg, Starbucks etc. VirnetX needs to make more efforts to acquire patents which are already revenue generating so that infringement lawsuits become the “bonus” rather than the mainstay. Investors look at these business models in a different light and are more confident of investing in those companies. Lower risk and higher rewards are always preferred by investors. Meanwhile, VirnetX will remain majorly dependent on the lawsuits.