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The stock has appreciated 90% over the last one year. The upcoming Q3 earnings will determine the short term trend of the stock. In Q2'13, the company had posted around 6% growth in the top line, and the losses had declined significantly on a sequential basis. It is important for the company to post a good set of numbers because negative surprises can lead to profit booking. In fact, the stock has already come down a bit from the high made earlier this month. Like most of the companies in the sector, the company has been mostly reporting losses over the last few years. Even the topline growth has not been too robust. The acquisition of Ameristar will help it double in size and increase its market share significantly. However, it is expected to increase the debt as well. Leverage is high in the entire industry, and is also a concern for Pinnacle. The sector faces several challenges. Discretionary spending depends on improvement in the economy, and organic growth in revenues is linked to that. In addition, some of the bigger names are facing a multi-billion dollar lawsuit filed by MGT Capital Investments (MGT) for which Markman hearing has been fixed. A recent ruling in the case was largely positive for MGT, and it stayed proceedings against Caesars, MGM and Penn National Gaming pending litigation against some other defendants. For Pinnacle, the Ameristar acquisition is expected to be good for the long term. Though Zacks has recently downgraded the stock to neutral, analysts are largely positive about the company. The price target given by Zacks is $28.20. Barclays has a PT of $29 with an overweight rating, while Deutsche Bank has $30 with a buy rating. JPMorgan Chase has a target price of $31, and an overweight rating. The consensus rating for the stock is Hold, and the average target price around $23.60.
The recent recovery in gold prices has led to a rally in most gold stocks. The gains are not totally uniform, and stock specific factors like earnings etc. are playing a role. Alamos has also shown a nice rebound over the last couple of weeks. It is not sure whether gold has completed the correction or not, but important levels have held. More testing is surely required, and news from the Fed or economic data may keep the volatility high. Alamos has remained an out-performer, and did not correct as much as many other gold stocks did during the most recent correction in gold prices. It is nearly 60% above the June lows. Earnings are expected soon, and that could be a trigger for the stock. Credit Suisse has a PT of C$16.50, and RBC capital has C$18. The consensus rating is buy, and the average price target is around C$17.8. This indicates that the analysts are largely positive on the stock, and there is still some upside potential. The views on the sector are also more positive now as many are beginning to see value in some specific stocks. The managements are more confident. Pershing Gold (PGLC), a development stage company recently announced that had taken steps to start production as per schedule. Alamos has a relatively low cost of production, and the balance sheet is stronger compared to some peers. There was no debt on books on June 30, and it had around $467 million in cash. All this makes a case for investment, though the valuations may get stretched if the stock rises much further. However, the fundamentals are better compared to many peers because Alamos has a better bottomline on a ttm basis. It needs to cross $17 convincingly to start fresh leg of uptrend. That will squarely depend on the earnings and the movement in price of gold.
Agnico is considering selling a minority stake in its Meliadine gold project in Canada's Nunavut Territory, to reduce the capital spending burden. Management had recently announced curtailment of expenditure on the high cost project. The transaction may take several months, but it indicates the intent of the management to keep the risks under control. The debt has been increasing during the recent quarters, and stands at $950 million as on Sep 30. The cash has also declined significantly. This is a bit of a concern. So it is imperative for the company to keep its cost reduction efforts going. Meanwhile, the stock has done well after the earnings release, and the volumes have also been high. The guidance for 2013 production was increased to 1,060,000 ounces of gold, and the all-in sustaining costs in 2013 are also expected to be lower ($1025 per ounce) than what was previously guided by the management. The cash costs are also expected to be lower ($690) than anticipated. The recovery in gold prices has improved the sentiments slightly, but it is not sure that the correction is over. The entire sector has been extremely volatile on the back of the ups and downs in the prices of the precious metals. However, the rebound has improved things a bit, and there are signs from other companies which indicate increasing confidence of managements. Pershing Gold (PGLC), a development stage company, recently announced that it had taken steps to start production as per schedule. For Agnico, the dividend yield is around 2.9%, and the expected reduction in production costs is likely to improve the bottom-line. The company reported a net income of $46.8 million in the first nine months of 2013 compared to $228.1 million in 2012. Though the net income has fallen, the company remains in profit even on ttm basis.
The earnings are not far away, and the weakness in the stock is increasing. The volumes have been higher, and important levels have been breached. It needs to bounce back soon, otherwise the correction may run much deeper. The last earnings release was very good as the company had beaten the analyst estimates by a decent margin. The EPS came in at $0.22 against analysts estimates of 15 cents. The topline performance was close to expectations. It needs to deliver a stellar set of numbers for Q3'13, otherwise the weakness in the stock will increase significantly. Positive surprises have the potential of having an exaggerated effect due to the high level of shorts. As on October 15, 10.4% of the float was short. Though the data is old, the trend has been towards increase in short positions. The price on October 15 was $37, and it has corrected from those levels. The Q3'12 performance was affected by an abnormal inflow, so the post Q3 earnings ttm EPS will be more representative of company's performance. The current P/E is below 6, and that will shoot up once the Q3 results are factored. So existing valuations are high, and the stock is weak. This makes exposure to the earnings a bit extra risky. InterDigital gets a steady stream of licensing revenues due to its patents portfolio, and a more diversified base can make the topline more stable. There is increased awareness in the market, and many companies are trying to monetize their proprietary or acquired patents. Marathon Patents Group (MARA) recently acquired several patents, and three of its portfolios have already started generating revenues. InterDigital has a strong balance sheet with loads of cash and reasonable debt. A couple of good quarters will take the stock back on the growth track, where it actually belongs.
There are differing opinions on what Nokia should do with the cash it gets from Microsoft (MSFT). While some want the company to give it to the investors, some want the company to use it to build the business. An article on SA analyzes this from a few perspectives. The author suggests that it may not make sense for Nokia to pay a special dividend or go for an aggressive buyback. While that may have a positive impact on the shares in the short term, the long term performance of the stock will be dependent on how its business grows. So it is important for Nokia to explore new opportunities and diversify over the long term. The mapping business is doing well, and the partnerships with car companies hold a lot of promise. That business could be an important driver going forward. Buying a loss making company like Alcatel, as some are suggesting, will put the company back in a very tight spot. The author mentions that, as per its agreement with Microsoft, Nokia could go back to the mobiles business after 2015. However, that market is already very competitive, and unless there is some disruptively innovative technology, it may not make sense to go back there. The growth in the smartphones market may not be that robust after a few years, and there is likely to be cannibalization of sales of new phones by used handsets. In the next five years 8% of the new phone sales will be cannibalized by used handsets. Companies which are selling used phones, like Usell.com (USEL), are showing good growth in topline based on the new found awareness of the value of used handsets. With such a huge amount of cash, there will be people approaching it with new ideas. So it is best to wait till it gets the right opportunity.
The stock has shown resilience over the past few months. It is up 44% over the last one year, though the intervening period has seen a lot of volatility. It has moved up despite not meeting analyst estimates of earnings. Even in Q3, the company reported numbers which were slightly below estimates. However, the stock continued its upward march. Analysts have been a bit negative on the stock with Credit Suisse downgrading it from a focus list rating to an outperform rating recently. Thomson Reuters/Verus also downgraded it from a hold to a sell rating. On the other hand, analysts at RBC Capital raised their price target for the stock from $57 to $59. It has an outperform rating. The consensus rating for the stock is Hold, and the average price target is just below 56. This indicates that the analysts consider the stock to be fully valued, and some expect it to go down from current levels. There was a ruling in the patent infringement lawsuit filed by MGT Capital Investments (MGT) where Penn is one of the defendants. While the ruling was largely positive for MGT, Penn got a temporary stay pending the outcome of the litigation against retailers of the machines WMS and Aruze. However, the stock has defied analyst opinion, and can be considered a better bet in the sector. This is because it is one of the few companies with a positive bottom-line. It has been reporting net profits over the last couple of years, and it is likely that it may do so in 2013 as well. However, the valuations are a bit high now, as the ttm P/E is above 60. However, the price to sales & price to book are low at 1.51 & 1.95 respectively. The level of debt is high, and that needs to be brought down over time.
The stock has multiplied several times compared to the 52 week low of $4.52 made in November. This is despite a 28% correction from the high over the last couple of months. So the stock has done great for the investors. However, this is not backed by fundamentals. The company continues to report net losses, and even the top line is not showing any sign of growth. The positive performance of the stock indicates its resilience. The company is going to release Q3'13 numbers in a couple of days, and that could be a trigger for the stock. Positive surprises can surely help it rebound. The short interest has been high for many months, and good numbers could increase the pressure from the buying side. The company missed the estimates last time around, and investors would hope that it does better this time. Earnings exposure is best avoided, though one can play as per his risk appetite. It is imperative for the company to improve its financial performance over the next few quarters and years. It already has a negative book value, and the debt is at extremely high levels. While the revenues (ttm) are around $8.52 billion, the debt was $21.3 billion as on June 30. The ttm net loss is $1.33 billion or $11.21 per share. Cash was $1.81 billion, and it is difficult to service such high levels of debt. Also, there was a ruling in the patent infringement lawsuit filed by MGT Capital Investments (MGT) against Caesars and several other casino companies. The ruling was pretty positive for MGT, and Caesars got a temporary stay pending the outcome of the litigation against retailers of the machines WMS and Aruze. Meanwhile, Thomson Reuters/Verus have recently upgraded Caesars to a buy, while Bank of America has retained its underperform rating for the stock.
There has not been much news flow from the company recently. The stock has been quiet and the volumes have been low. A recent presentation filed by the company emphasizes on the fact that its effective due diligence has secured excellent results in acquiring premium patent assets. It has been able to execute settlements from its initial licensing campaign within 3 months. There are high hopes from the CEO Hayes based on his past track record. He has successfully monetized patents through a wide variety of monetization methods, including asset restructuring and licensing brought against companies such as Cisco, Broadcom, Nokia, Ericsson, Tellabs, and Alcatel-Lucent. In case of Mango Capital, the shareholders got a substantial cash dividend based on the value of the patents, mainly because of the efforts of Hayes. He joined Spherix through a merger with North South Holdings (his previous company), and he brought with him a portfolio of 222 patents related to wireless communications developed at Harris Corporation. In addition, the company has acquired patents from the Rockstar Consortium. It has already filed lawsuits against big companies like T-Mobile USA, VTech and Uniden. The company now possesses a diversified patent portfolios covering different industries. This minimizes the risks associated with concentrated holdings. Analysts are turning positive about the stock, and Greg Miller had recommended to buy Spherix in an article on SA. He is upbeat about the company mainly because of the manner in which it has transformed itself into a patent assertion entity. The background of the new CEO is also one of the main reasons for his faith in the company. He values the patents of the company anywhere between $50 million to $350 million. The key to improving the finances is getting regular inflow from licensing arrangements. That will make the outlook much better.
There has been increased interest in the company over the last few months. The stock has doubled this year, and has multiplied more than 3 times compared to its 52 week low. The volumes have also been pretty good. There is greater awareness about the phenomenal growth prospects of the used phone market. One article on the Guardian had mentioned that the used smartphones will increasingly cannabalize the new phone sales over the next 5 years. In five years, 8% of the new phone sales will be cannabalized by the old smartphones against the existing figure of 3%. Even other used electronics devices / gadgets can be monetized. Companies like Usell are attempting to take advantage of this expected boom. For example, used smartphone market is poised to multiply nearly five times from 53m to 257m units over the next five years. Apple products' resale value is a competitive advantage which is not easy to replicate. Used iPhones get a good price. The process at Usell is hassle free and the price discovery is believed to be better. Usell works with nearly 40 sites that purchase used phones and other devices. Usell may also enter into the used jewelry / watches market to expand its activities. Even the manufacturers are trying to get the used handsets so that they can recycle them for sale in other markets. This is likely to increase the market size even further. As per Usell management, the traffic tripled at usell.com after Apple announced its reuse program and the launch of new version recently. So it is highly likely that the topline will grow at a good pace, but what is important is that the company should keep the costs under check to improve the bottom-line. Dr. Frost's support and interest in the company can help it immensely.
The upcoming results will be the next trigger for the stock. The management guidance for revenues is $35-38 million which indicates that the revenues are likely to fall on a yoy basis. The sale of some Micro-optics assets to FLIR will yield an $15 million. Even in the last quarter the revenues had declined significantly on a yoy basis. Over the years, the revenues have declined, and the losses have increased. Though the digital optics segment is primarily responsible for the operating losses, even the IP segment has not performed that well. The revenues have declined and the profits have also come down. The overall market for monetizing IPRs has done well recently, and several companies have begun to assert their proprietary or acquired patent rights. Spherix (SPEX) recently acquired hundreds of patents and has already filed lawsuits against big companies to enforce its rights. Tessera's bottom-line has been hit by litigation, restructuring and goodwill impairment expenses. Even the R&D expenses, mainly compensation to personnel, have been on the rise. However, things may improve after the spin-off of the manufacturing part of the digital optics segment is complete. This is because a major portion of the operating expenses are attributable to this loss making segment. The exact impact of the expected spin-off will be known over time, and the future numbers will be better if it yields the expected results. Meanwhile, the stock has fallen over the last few months. Despite the correction it is still up 33% over the last 52 weeks. It needs to rebound and cross $20 convincingly so that the uptrend can resume. Ultimately, the upward movement will depend on the financial performance. The spin off may reduce the expenses, but the company needs to find ways to bolster the top line. The god part is that the company has a good amount of cash, and has zero debt.
The last one month has been great for the stock. It has moved up by nearly 13%, and the performance over one year has been even better. The last few days have seen higher volumes, and the stock has made its 52 week high recently. It is important for the stock to sustain above critical levels so that the breakout can be confirmed. Despite the appreciation, the valuations remain reasonable. It is trading at a price to sales ratio of 0.56. This is good for a company which has an operating profit margin of 4.5% on a ttm basis. Even the net margin is only slightly negative at -2.01%. So it is not far away from profitability, and the possibility of a turnaround is high. It has recorded revenues of $684 million on a ttm basis, and the net loss is $14 million. So the current year is expected to be better as compared to the last year when the company recorded revenues of $650 million. The net loss last year was $16 million. Improvement in the bottom-line requires the next couple of quarters to be good. Of course, the most important factor is the support of Dr. Phillip Frost. He is known for his vision at picking up companies with great potential when they are undervalued by the market. Many of his stocks have done great recently, with several delivering more than 100% return. His investment in Biozone Pharmaceuticals (BZNE) has made news recently, as that company owns the high potential QuSomes drug delivery technology. For Ladenburg, the upward momentum will be sustained in the long term only if it is supported by improved fundamental performance. The balance sheet of the company is strong as it has $50.82 million cash and the debt is $86.45 million. Next quarter results will be especially important.
The recent performance of the stock has been very good. It has done great over the last two months, and the recent volumes indicate increased interest. The volatility is high, but the run up also has been huge. Many analysts have expressed positive sentiments about the stock, especially after the agreement / investment made by Opko Health (OPK) and, more recently, MusclePharm (MSLP). The investments have been due to the great prospects of the QuSomes drug delivery technology. Opko and MusclePharm may benefit from the technology once it successfully goes through the trials / approval process. QuSomes are believed to improve solubility of drugs, and reduce the cost of manufacture. It makes the drugs more effective at lower doses, which reduces the treatment costs and side effects. More importantly, the contract manufacturing business of the company will benefit immensely from the agreement with MusclePharm, even if it shifts a portion of its manufacturing to Biozone. Investments in the company indicate that Dr. Frost, who has stake and influence in Opko and MusclePharm, has tremendous faith in the future of the technology. Opko has been working on the technology since many months now, and it is possible that his confidence is based on results of the tests. Analysts consider Biozone different from other companies working on developing new technologies, because it already has another business which gives it cash flow. There are expected synergies between the two businesses, and the support of Dr. Frost can help it find the resources to optimize the value of Qusomes. The existing cash position of the company is good, and it may get a bonus by way of some pro-rata dividend from liquidation of BetaZone Laboratories where it has a 45% stake. The exact amount is not known yet, and may be reflected in future earnings.
Now that the court ruling is out, it is clear that MGT has crossed the first hurdle. The claims of direct infringement have not been dismissed outright, which indicates that they have some substance. Importantly, the venue will not be changed, which implies that there will be no delays in the progress of the case. This will make things easier for MGT, and perhaps keep the costs within check. The court did not allow splitting of the Aruze and Penn lawsuits, but allowed to sever the action against WMS, Caesars and MGM. However, the defendant's motion to dismiss contributory and induced infringement claims, and the motion to pause proceedings against MGM, Caesars and Penn was granted. This is because these are retailers using the machines, and may be liable only once the manufacturers are held guilty of infringement. So once WMS and Aruze are proven to be infringing on MGT's patents, then the users (MGM, Caesars & Penn) will be proceeded against. In a way, this is good because it reduces the cost of trial till the main issue of infringement is decided. The Markman hearing will be held as per schedule in June next year. That will determine the future course of the trial. There are other events before that, so there may be more news related to the lawsuit. More news can also be expected on the daily Fantasy Sports business. While the expected award in the trial is huge, the daily fantasy sports business also has a lot of potential for the company. The next few years are likely to see exponential growth, and if MGT can successfully leverage the growth story, it can make that business its mainstay. With experienced leadership, it is quite possible that we may hear good things about the progress being made by the company in the Fantasy sports business.
The recent acquisition of patents by the company brings the total number of portfolios for Marathon to seven. The latest acquisition consists of four patents related to process automation in production and enterprise resource planning (ERP). The patents address the ability to enhance ERP and production planning processes through the introduction of adaptive learning processes. Three of the company's portfolios (Sampo, CyberFone and Relay) are already generating settlement revenue. The company is working with its partner IP Navigation to monetize the Bismarck portfolio as well. The CEO of the company stated in the press release that the company will continue to focus on building a diversified portfolio of compelling patent assets. Many analysts are upbeat on the stock after it earned $1.5 million revenues in Q2'13. They are expecting the company to turn profitable soon. In fact, a recent article on seekingalpha had predicted that the company could report a net profit in its next earning release (for Q3'13). Greg Miller had predicted a 50% upside for the stock by 2014, and that is achievable if the company reports good numbers. The earnings may also be seen to understand the expected consistency of the inflows over the next few quarters. The company has a low cash burn rate, and even the current cash position is good. Regular inflows will improve the balance sheet, and, consequently, the outlook people have towards the company. More analysts will turn positive about the future. The low float makes the stock volatile, but it easier for the price to go up if the company reports a profit or if there is any other positive news. Institutional investors had put in money in the company recently at $5.20. That point can be expected to provide support to the stock in the short term. Earnings will be an important trigger.
The stocks from this sector have been exceptionally volatile over the last 4-5 months. There was a strong rebound from the June lows which has met with resistance at higher levels, but the lower levels have provided support so far. The industry has taken steps to reduce cost and postpone capital expenditure. The prices are not expected to shoot up suddenly, so it makes sense to remain realistic by operating only those mines which are viable. An article on seekingalpha recently stated that there could be deep value in the sector if one views it from the long term perspective. The gold prices may have seen a bottom at around $1200 per ounce. Even IAG has been successful in reducing capital and operational costs. Even the all-in-sustaining and cash cost guidance was reduced, though the costs still remain high compared to some of the peers. However, the valuation is attractive as the stock is trading at half its book value. Despite the 15% rise over the last few days, the dividend yield is extremely high, and the scope for capital appreciation does make a case for investment. Even the leverage is within reasonable limits if one considers the cash position. HSBC has recently upgraded the stock to overweight with a price target of $6.20. There have been some upgrades for others also which indicates that the analysts may be turning a bit positive on the sector. There are also signs from smaller companies which indicate increased optimism of the managements. Pershing Gold (PGLC), a development stage company, recently announced that it is positioned to start production from its facility in Nevada as per plans. These signs do make a case for long term investments. However, stock selection will be the key to maximizing returns and minimizing risks.
As per the latest PR, the company has taken a significant step towards putting its Relief Canyon Mine in Pershing County, Nevada back into production. Knight Piésold has been selected to perform the geotechnical engineering work required to update several key permits for the mine. As per CEO Stephen Alfers, the expertise of the consultants will help Pershing optimize the design of the expanded mine and secure the required permit modifications. The company's 2013 drilling campaign is still in progress as drilling continues in an area mainly north of the North Pit. The current drilling effort has the objective of expanding and upgrading the existing measured, indicated and inferred resources. The results were encouraging, and the drilling also discovered several high-grade intercepts. Most importantly, Alfers stated that Pershing is well situated to become Nevada's next new gold producer because the company already has a fully constructed and permitted gold recovery facility for its gold resources. So the company is poised for fast-track resumption of gold production with only modest capital expenditures to re-start the entire operation. The news is a great one for the company, and the management should provide more information related to the time frame for start of production. Though the exact time of start of production cannot be estimated with precision, a broad idea should be given. Meanwhile, gold has been extremely volatile, and it is not totally sure whether it has completed its correction. Stocks of several companies have been beaten down again, and stock specific action may be seen in the sector as soon as the confidence improves. For Pershing, as per earlier reports, the cost of production is expected to be much lower than industry standards. So the company can achieve decent margins even if Gold remains around current levels.
The stock has been extremely active recently, and the awareness and interest in the company has increased. The volumes have increased tremendously, and the last three days have seen nearly three millions shares being traded. There is increased awareness about the value of the used phones and other electronic devices which are usually lying at homes. There have been several articles regarding the advantages offered by Usell compared to other sites which sell used phones. There is huge value to be unlocked, and the market will only increase with time. Two versions of smartphones are not that apart on technology. Some buyers may prefer to go for older versions of a high end brand instead of going for lower end phones. The market is particularly active when companies like Apple launch new versions. The demand for handsets of older versions shoots up suddenly. There was an article on seekingalpha recently mentioning that high resale value of Apple products is a source of competitive advantage. Importantly, this advantage is not so easy to replicate as it is linked to the brand value. Usell is also planning to expand to other low weight expensive articles like watches and jewelry. Meanwhile, the company recently appointed Steven Rubin and Gerald Unterman as strategic advisors. Rubin has held senior positions in IVAX, OPKO Health, and is on the boards of several other companies where Dr. Phillip Frost has a major interest. As per the 8K, he has extensive leadership, business, and legal experience and is a practicing lawyer, general counsel, and board member to multiple public companies. He has broad understanding and expertise, particularly relating to strategic planning and acquisitions. Unterman has expertise in investment management. Earlier, Michael Brauser was appointed Chairman of Usell replacing Sergio Zyman who resigned as a director. Daniel Brauser, the Company's President, was appointed interim Chief Executive Officer to replace Zyman.
The earnings were better than estimates, and the market is expected to react positively. The EPS was $10.74 compared to the $10.34 that analysts were expecting. The after-hours trading indicates that the stock may open much higher. If it manages to scale new highs and sustain those levels, then a new leg of the uptrend could start. By and large, Google keeps delivering, and the fundamentals keep catching up with the stock price. The valuations are not cheap, but consistency in performance does help the giant win over the analysts. The cost per click continued to decline, though the higher volumes made up for that. This is the likely scenario going forward, as people access internet more frequently from the mobile devices compared to the access from PCs. The total volume of paid clicks rose 26 percent year over year, offsetting the 8% decline in cost per click. Sequentially, the cpc declined 4% while the volume of paid clicks increased 8%. As pointed out by one analyst, the pace of Google's growth has slowed down over the years, and that is one reason why Google is investing so heavily in new ventures as new products are needed to reignite revenue growth. However, revenue at Motorola Mobility has been falling and losses from the unit increased 24% to $248 million. The smartphone market is increasingly getting crowded. Resale value is a selling point now, and Apple (AAPL) products score better on that. Usell (USEL), a company which provides a platform for selling used mobile phones and electronic devices, recently posted great growth in revenues. So results from this endeavor may take time for Google to yield the desired results. Smartwatch segment is believed to be an exciting opportunity, though it is still early days to estimate the possible size etc. accurately.
The Q3'13 earnings were bad as the revenues declined sharply both on a yoy and sequential basis. Even the net loss increased on a yoy and a sequential basis. The ttm figures indicate that 2013 will be a bad year for the company. Consequently, the earnings release led to sharp decline in the stock, and the after hours quotes are indicating that there could be more pain in store. It will be difficult to get out of this hole as the company has posted bad numbers for three quarters in a row. It is now a declining trend, and there could be downgrades from analysts. The trading volume was 1.4 million, but it seems that the entire impact of the numbers has not been factored yet. These earnings were extra crucial, and now the stock may go to much lower levels over the next few months. It has broken the strong supports around $20-21 and now may go all the way to $15-16. The Q3'13 revenues were $15.5 million compared $34.9 million in Q3'12 & $23 million in Q2'13. The net loss was substantially higher at $15.7 million compared to $6.6 million in Q3'12 and $12.5 million in Q2'13. In the third quarter of 2013, three licensees individually accounted for 34%, 31% and 19% of revenues, as compared to five licensees individually accounting for 30%, 13%, 10%, 10%, and 10% of revenues recognized during the third quarter of 2012. This points to higher dependence on a few clients for majority of the revenues. Diversity is important to reduce uncertainty and risk, especially in view of increased competition in the sector. There are patent assertion entities like Spherix (SPEX) which are working to increase the diversity of their patent portfolios. Several companies are more aggressive, and hence it is important for Acacia to diversify to smoothen the curve.
RPXC has already done well for investors in 2013. It has appreciated by nearly 80% on ytd basis, and it has doubled compared to the 52 week low of $8.55 made in November. The last two months have seen a 15% rise in the stock, which makes it a bit vulnerable to profit booking in case of negative news flow. The earnings are going to be declared at the end of this month, and that could be a short term trigger for the stock. Good earnings can take it beyond $19 levels, but negative surprises could lead to a lot of profit booking. So the exposure will be risky as usual. Even the last earnings had led to some profit booking, and thankfully the stock managed to stage a smart rebound. The valuations are higher, and good numbers will help improve the ratios. The ttm P/E is around 21.66, and the forward P/E (fye 31-Dec-2014) is 16.75. The difference indicates moderate expectations of growth over the next 4-5 quarters. This is inline with the management guidance for around $229 - $235 million in revenues, and Non-GAAP Net Income of between $50 - $53 million for 2013. The ttm revenues are currently around $217 million and the net income is $43 million. In 2012, the revenues were $197 million and the net income was $38.45 million. Considering the good growth trends in the market, there is scope for good growth in the top line. However, competition is also increasing, and several companies have become more aggressive in the marketplace. A patent assertion entity Spherix (SPEX) has recently acquired hundreds of patents with a clear strategy to monetize them through litigation and licensing. It has filed cases against giants like T-Mobile (TMUS). RPXC has a strong balance sheet with zero debt and good amount of cash. So the upward momentum can increase if the numbers are good.
The recent performance of the stock has been amazing. It has appreciated by around 70% on a ytd basis, and even over the long term it has done well. It has appreciated 560% over the last 5 years, and the momentum is still not too bad. As mentioned in an article on SA, there has been insider selling in Actavis in 2013, though that is not significant in the broader scheme of things. While insider selling is not always indicative of poor expectations by management, purchases do indicate positive outlook. Stocks like OPKO Health (OPK) and Biozone Pharmaceuticals (BZNE) have yielded exponential returns backed by insider purchases. For Actavis, there have been no insider purchases recently. However, the acquisitions made by the company over the last 4 years have helped it increased its global presence in various markets. As mentioned in a Zacks report, the recently concluded $8.5 billion stock-for-stock Warner Chilcott acquisition has increased the size and presence of the company significantly. The joint entity holds third position in the U.S. specialty pharmaceutical market with annual revenues of about $3 billion. The good part is that the acquisition is expected to be EPS accretive, and there are likely to be post-tax operational synergies and related cost reductions and tax savings of more than $400 million. The tax rate is also expected to come down. The cash flow will help the company reduce the leverage, which is one of the major concerns as of now. Analysts are positive on the acquisition, though the real impact of the deal will be more evident over the next few quarters & years. A Motley fool article compared Actavis with Teva (TEVA) and Mylan (MYL). It gave a thumbs up to Actavis and Mylan due to their balanced portfolios, while expressing negative opinion about Teva due to its over-dependence on a few drugs.
Perrigo has done well over the last few years on the back of reasonably good fundamental performance. There was an article on SA which was a bit negative on the stock mainly due to recent insider selling. The author also pointed out that the insiders have not made any purchases since quite some time. Though this does indicate lack of a overtly bullish stance by the management, considering the size of the float (93 million), the low proportion of insider ownership (less than 2%), and amount sold by insiders in 2013 (177K), this alone cannot be a strong enough reason for being negative on the stock. Further, insider selling is not always associated with negative outlook of the management towards the company's prospects. On the other hand, insider purchases are usually associated with positive outlook of the management. A recent case has been OPKO Health (OPK) and Biozone Pharmaceuticals (BZNE) where purchases / support by insiders have led to a lot of positive momentum. The valuations of Perrigo were also cited as a reason for being negative on the stock. However, the ttm P/E is around 28 and the forward P/E is 16 (fye June 29, 2015). The difference indicates expectations of growth in EPS and even the PEG of 1.42 is not very high. The price to sales of 3.51 is also not too high if one factors the net margins of 12%, though comparatively it may be a bit on the higher side. Management expects 13% to 18% EPS growth in fiscal 2014. The acquisition of Elan is expected to be EPS accretive to extent of 10 cents per share in fiscal 2014 and 70 to 80 cents per share in fiscal 2015. The stock is trading around the 52 week high, so there is not much hint of weakness yet. Even the author wanted a technical confirmation before going short on the stock.
The movement of the stock over the past few years can mainly be attributed to the influence of Dr. Frost. Surely the company has made strategic investments and acquired several companies, but it is important to note that many of those investments may take years to yield tangible returns. The revenue growth has been excellent, but the losses have continued over the years. In any case, the momentum has only increased recently. The volumes over the last two days has been extremely high with nearly 29 million shares being traded. Interestingly, there were around 35 million shares short on September 30. The price on September 30 was below $9, and the stock has traveled quite a distance since then. Based on this, many are attributing the recent rise to a short squeeze. The trigger was the announcement of investment in Zebra Biologics, but the fundamental impact of that may take years to come. The undisclosed investment is relatively speculative as Zebra is into development of next generation antibodies. Dr. Frost has continued to purchase small quantities of the stock consistently, and that could be the real reason for the recent bout of optimism. Frost now controls a total of 152.3 million shares of OPKO Health out of the outstanding 403.6 million shares (37.7%). If he gets aggressive, the large stake makes a strong sentimental and technical impact on the buying pressure. His investments in Biozone Pharmaceuticals (BZNE), which owns the high potential drug delivery technology QuSomes, has also done well. The agreement between OPKO and Biozone, had also made news. The acquisition of PROLOR Biotech, and many others over the last couple of years has helped the stock post remarkable gains. So the stock is trading on future promise, and valuations are not being considered. Still, there is room for more upside as long as Frost is bullish.
The stock has remained within a range, and the volumes have been low. It may continue to remain quiet till some news flow brings back the momentum. The company has been in the news for various reasons like its investment in Biozone Pharmaceuticals (BZNE) and shipping of the Combat Protein Powder to Costco stores. The product will also begin to be sold on Costco international locations in the later part of 2014/ early 2015. In addition, the news about the collaboration with Arnold had also led to excitement recently. Revenue growth is likely to be bolstered by these deals and collaborations. The strength of the brand will increase further. What is most critical is for the company to reduce costs even further so that it achieves a net profit. That will change the outlook towards the company. The recent numbers have not been so great on the bottom-line front, but it is expected that the company will be able to deliver better results in the next few quarters. The collaboration with Biozone is expected to streamline manufacturing for its product line, and Biozone's QuSomes technology may also be of interest to the company, since liposomes have been used to deliver nutrients as well as pharmaceuticals to the body. The QuSomes technology is believed to reduce manufacturing costs, and improve absorption / efficacy of the products. This may help in reducing costs and improving margins. Though the company is not competing so much on cost for all products, lower manufacturing costs will give it the flexibility in the marketplace to implement new marketing strategies. The next few quarters will indicate the progress being made by the company on its cost reduction efforts. Growth in topline is not going to be that tough, though the pace may slow down after a few quarters.
The stock has crashed by 50% over the last 2-3 months. A major part of the cut has come over the last few days. It has declined by 23% over the last five days, and the volumes have increased significantly. The weakness is indicated by the fact that the ten day average volume is double the three month average. The crash in the stock has brought it to critical levels. A crack below current levels will take it much lower. The possibility of a bounce is low, because not many expect good things from the trial of the patent infringement lawsuit against Qualcomm (QCOM). The selling has increased after the news related to start of the trial. The analyst opinion is largely negative, and the risk of being associated with success of a single event has adversely affected the stock. Several companies have realized the importance of having a diversified portfolio. Spherix (SPEX), a full service IP company has recently built up a diversified portfolio comprising of hundreds of patents. For Parkervision, the shorts have increased over the last fortnight, and on September 30, 24% of the float was shorted. These high levels indicate that not many expect the company to cross the first stage of the trial where the jury will decide if there has been any infringement or not. If this stage is crossed, then the jury will determine the damages payable. In case of any adverse news, the weakness will increase further. The stock had run up sharply over the past two years due to positive expectations related to the trial. The positivity had increased after the Markman hearing largely went in Parkervision's favor. As per the pre-trial statement, Parkervision has sought $500 million in damages which is a huge amount if one considers the current market cap of the company. Good news can surely change things.
The stock has been a bit buoyant recently, and has appreciated by more than 11% over the last one month. A major portion of this upward movement has come over the last 5 days, and the volumes have also been high. The momentum can take it a bit higher, but lack of support from fundamentals may lead to selling at higher levels. Over the last few weeks the news has not been too positive. Google has asked for invalidation of the two mobile advertising patents for which Unwired had sued it last year. Google is contending that both are abstract ideas that cannot be patented. Also, Unwired recently announced appointment of Grant Thornton as its independent registered public accounting firm beginning for its first quarter ended September 30, 2013. The decision to dismiss KPMG and to engage Grant Thornton was recommended by the Audit Committee of the Company’s Board of Directors. The related SEC filing mentions that KPMG’s report indicates that the Company did not maintain effective internal control over financial reporting as of June 30, 2013. The controls did not operate effectively due to a lack of resources with experience in financial reporting. This is perhaps indicative of the quality of personnel in that department, and nothing more than that. The real issue is being able to show progress related to its patent monetizing efforts. IPR monetization is huge business now, and more and more companies are asserting their rights. As an example, Spherix (SPEX), a full service IP company has recently built up a diversified portfolio comprising of hundreds of patents. It has filed lawsuits against big companies like T-Mobile (TMUS) within a few months of transformation to a patent asserting entity. Unwired has the potential, and the resources have improved. However, something special needs to happen quickly to bolster the stocks fortunes.
A recent article on smallcapnetwork predicted that Usell's revenue in 2014 could easily eclipse its current market capitalization even if it is able to maintain a growth rate close to the current trends. The gross margins have exceeded 90% during the past six consecutive quarters with no signs of slowing growth. uSell.com could be a great opportunity with potential of multi-bagger returns in 12 months. It has managed to find a niche, capitalize on its user base quickly, and attract world-class leadership and financial backers. The average registered user spends less than eight minutes per visit on uSell.com. The entire process is quick, painless and cash-based, unencumbered by "credits" or "gift cards" that plague other buyback programs. There is also no need to wait for an auction process to get over, and sellers simply receive cash for their device. Usell attempts to unlock $7000 of used electronics items lying in each American household. Dr. Frost has invested in the company and former Chief Marketing Officer of Coca-Cola is now the CEO of uSell.com. Usell users have earned $11 million from the website by selling their devices. In an interview to Forbes, the COO of the company said “With the speed of improvements in personal technology, from smartphones to personal computers and even televisions, America is already facing a huge problem of electronic waste. Millions upon millions of devices lie dormant. Many have a useful “next life,” and this equipment can and should be monetized.”. He highlighted the ease of selling the devices on usell.com compared to the competitors sites. He also pointed out the high cost involved with those sites. The company intends to expand to high value and low weight merchandise like watches and jewelry. Currently Usell has over 40 active buyers, and the website visitors are up five to ten times compared to last year (in excess of one million users per month).
The company's prospects have been discussed in a report by Zacks. The analysts have maintained their neutral recommendation on America Movil. The company is expected to do well based on increased penetration of 4G mobile services and expansion of its PayTV platform. However, it is likely to face regulatory challenges especially in Mexico. Stiff competition in markets like Brazil and high promotional spending can lead to lower margins. Huge customer churn may also hurt topline growth. The PayTV business is doing very well and has become a significant revenue contributor for the company. However, being a low margins business, increase in PayTV's weightage can put pressure on the overall margins. It remains the largest player in Latin America, and is making investments for expansion of its network to serve the customers better. Launch of the 4G mobile services in Mexico will help the growth prospects of the company. Revenue growth is expected to be good in regions like Brazil and Mexico where the focus is on winning contract subscribers, thereby reducing the churning. The growth prospects are relatively better compared to some other players operating in more saturated markets. AT&T (T) and Verizon (VZ) are facing competition from old and new players like America Movil (AMX) and Deutsche Telekom (DTEGF.PK) who are giants in their respective countries. They are offering lower priced, less restrictive contracts which makes the competition more cost based. Availability of handsets without contracts e.g. at Wal-Mart (WMT) stores, and an increasing demand for used handsets is likely to make top-line growth difficult. Usell (USEL), which provides a platform for buying / selling used phones, reported phenomenal growth in revenues in the first half of 2013. These markets may undergo some consolidation, but the short term growth prospects are not that robust. For America Movil, the telecom bill in Mexico is likely to adversely impact the company’s performance. Going forward, the company is likely to face challenges, but the revenue growth prospects are relatively better.
The stock has done well over the past one year. It has appreciated by more than 25%. There have been some positive views from analysts about the company with recommendation to buy it from a long term perspective. While some investors may like to wait to see how the restructuring efforts play out, some could bet on the company in anticipation of good things. An article on seekingalpha had recently mentioned that Telefonica's value is currently clouded due to uncertainty about the forward dividend, high leverage ratios and integration issues. The company has been trying to reduce debt to improve the leverage position. The dividends were stopped, and that was one of the reasons for reduced interest in the stock. Compared to some peers who operate in saturated, regulated and intensely competitive markets, Telefonica has delivered good performance in Latin America, and the prospects are still good. The growth in Latin American markets and recovery in European countries where it operates makes top-line growth possibilities better. Companies like AT&T (T) and Verizon (VZ) are facing increased competition from America Movil (AMX) and Deutsche Telekom (DTEGF.PK). The competition is cost based, which may put pressure on the margins. Further, there is also an increasing market for used phones which is making topline growth difficult. Usell (USEL), which provides a platform for buying / selling used phones, reported great growth in revenues in the first half of 2013. The resumption of dividend of 0.75 Euro per share by Telefonica will give a yield of around 4.6% at current market price. This, coupled with the improving leverage position, and better growth prospects make it a good bet from a 2-3 years perspective. Even on the valuations front, the stock is not expensive, and if the dividends become recurring, then the current levels will appear to be good entry points in hindsight.
The stock has declined by around 11% over the last 6 months, and even the long term performance has not been too great. The dividend yield is an attraction, but analysts have conflicting opinion about the stock. A recent article on seekingalpha was not so positive about the stock as the author stated that the company will face increasing pressure on margins due to increase in competition. Increased competition from America Movil (AMX) and Deutsche Telekom (DTEGF.PK) will be a challenge, and the competition will be more based on cost. Further, there is also an increasing market for used phones, and resale value is becoming an important facet of competitive advantage. Some consumers prefer previous versions of the high end phones available through companies like Usell.com (USEL). Usell, which provides a platform for buying / selling used phones, reported phenomenal growth in revenues in the first half of 2013. Another article is cautiously optimistic about the stock. The author states that AT&T is trading at a forward P/E of around 12 which is not very expensive, though the PEG is a bit high. It is expected to do well in the future based on its strategic plans. The dividend yield of the stock is also in excess of 5%, and that may be a good return if the correction in the broader market runs deep or the markets get range-bound. Technically, the stock may not be too strong, but the recent news flow may increase investor interest in the stock. AT&T may be close to selling its tower portfolio to Crown Castle (CCI) for nearly $5 billion. While this amount may not be huge for a company of AT&T's size (and debt on books), it may have a sentimental impact. In addition, international expansion may help the long term prospects of the company.
The stock has been volatile recently. The short term movements may remain difficult to predict, but the long term prospects depend on the ability of Biozone to increase revenues from contract manufacturing and reduce costs to improve the bottom-line. Further, QuSomes drug delivery technology is likely to be a game changer once its benefits are available for commercialization on a large scale for specific drugs. Once the technology passes through the trials and approvals, it can be used to lower manufacturing costs of various drugs and supplements. An article on SA mentions that due to restructuring by liquidation of Equachem (Biozone's raw material selling business), the net loss of Biozone has declined by 80%. The high focus on QuSomes is reflected by the fact that the R&D spending has increased significantly. Interestingly, it may get some pro-rata dividend from liquidation of BetaZone Laboratories, a company that engages in the development, sale and licensing of pharmaceuticals and cosmetics in Latin America. Biozone owns 45% stake in that company. However, the exact amount of dividend is not known yet, and may be reflected in earnings soon. That inflow, plus the $2 million put in by MuscelPharm (MSLP) recently, will help the company strengthen its balance sheet. Even other analysts have commented on other aspects of the company's future prospects. Most are focused on the positive impact of investment support of Dr. Frost for the company. He, alongwith his other companies like OPKO Health (OPK), owns a significant chunk. MusclePharm has invested in Biozone mainly to gain access to Biozone's QuSomes technology. MusclePharm is likely to benefit from increased absorption of its supplements by use of the QuSomes. Further, Biozone's contract manufacturing facilities may be used by the company. The analysts also mention some risk factors which need to be considered before making an investment in the company.
The stock has corrected nearly 33% from the 52 week high of $0.40 made in August. Despite this, the recent performance has been good as the stock has appreciated by more than 285% on a ytd basis. There have been some positive voices about the stock. One article on seekingalpha has recommended to buy the stock as the company seems to be reducing its losses over the past few years. It is important to note that the company does not have any meaningful revenues as of now, and it may take some time for the company to get going on that front. The stock has done great, and hence it is vulnerable to correction due to profit booking. Positive opinion about the stock is primarily based on the fact that Dr. Phillip Frost had taken a big stake in the company a few months ago. The average price of the acquisition in April was $0.05. That improved the sentiments dramatically, and investors are expecting good things going forward. Frost's investments have done well recently, and he is known to be an astute investor in the pharmaceuticals / biotech sector. His investment in Biozone Pharmaceuticals (BZNE) has made headlines recently. Biozone owns a high potential drug delivery technology Qusomes. According to the author, taking a position in NIMU could be part of a larger strategy of Dr. Frost, and OPKO Health (OPK) could be interested in the company. NIMU's product could complement and diversify OPKO's business. NIMU's product, which can help diagnose health problems just through external sensors without invasive diagnostic procedures, is believed to have a lot of potential. However, there are associated risks, and conversion of this potential into meaningful revenues may take some time. The recent selling by insiders also cannot be ignored. Meanwhile, the stock has already run up quite a bit over the last few months, effectively factoring a portion of the future positives.
Greg Miller has recommended to buy Spherix in an article on seekingalpha. The main reason for the recommendations is the fact that the company has transformed itself into a patent assertion entity, and CEO Hayes can be expected to deliver based on his past track record. In case of Mango Capital, the shareholders got a substantial cash dividend based on the value of the patents, mainly because of Hayes. He joined Spherix through a merger with North South Holdings (his previous company), and he brought with him 222 patents related to wireless communications developed at Harris Corporation. In addition, the company has acquired patents from the Rockstar Consortium. It has also started an investor awareness campaign and is expected to clarify its new business to retail investors. It has filed lawsuits against T-Mobile USA, VTech Communications and Uniden. More lawsuits and licensing announcements are likely. It has also raised $2 million recently. Patents comprise most of the assets of Spherix. The author estimates the value to be anywhere from $50 million to $350 million. The wide range indicates the difficulty in accurately valuing these assets. For Spherix, the hundreds of patents provide it with diverse portfolio, and Hayes must have seen enough potential in these patents to convince him to join as CEO of the company. However, with a much larger share structure post the merger with North South Holdings, the valuations are heavily dependent on the quality of its patents and the ability of management and legal teams to monetize them. The low float makes the volatility extremely high. There is no doubt that the sector is buoyant right now and there is tremendous growth, but the risks in such investments are obvious. For the investment to succeed in the long term, Hayes needs to use his expertise to get revenue inflows into the company.
Despite the correction of around 24% from the highs, the stock is still up nearly 48% over the last three months. The stock has shown a bit of a recovery recently. The volumes have also been a bit high on some days. Some analysts have expressed positive opinion about the company. Dr. Frost's significant ownership is surely a sign of good future prospects. His acumen for investment and success stories are well known. His investment in Biozone Pharmaceuticals (BZNE), which owns the high potential proprietary drug delivery technology QuSomes, was in the news recently. Growth in the Chinese market is expected to bolster Tiger Media revenues over the next few years. A SA article mentions that Tiger Media is one of the leading nationwide multi-platform media company and one of the largest operators of LCD screen integrated outdoor billboard advertising networks in China. It operates 115 large format, high-resolution outdoor LCD screens in Shanghai. The company is expanding this business to the other cities as well. Since the population of each of these cities is high, the potential is tremendous. Interestingly, the LCD screens are going to become more interactive in the future, and hence they will be preferred by advertisers. The revenue potential is also high as in the first two months of its operations it earned $2.1 million in revenues. As the utilization rate increases and operational efficiencies improve, the top and the bottomline will grow significantly. The author has calculated a revenue potential of $140 million and expected EPS of $0.37. Furthermore, existing technology allows Tiger to enter the mobile ad space with offline to online (O2O) promotion and other interactive digital screens (networking with smartphone apps). The company intends to invest heavily into the latest technologies for new and creative media, and revolutionize traditional digital outdoor advertising by incorporating O2O business models.
The correction has run a bit deep, and the stock is now down 19% over the last one month. It is down 24% from the 52 week high made in August. However, despite the correction it has delivered great returns and has appreciated by 385% on a ytd basis. The merger with TransEnterix has changed the sentiments for the company. Synergies are expected between the two companies, and the combined entity is financially in a better position. The funding obtained by SafeStitch will help provide the resources required for development and commercialization of its products, especially SurgiBot surgical robotic system. The company got $30.2 million funding through private placement of equity, with TransEnterix contributing 65%, and Dr. Frost and other investors contributing 35%. The huge investment by Dr. Frost and his joining the board of TransEnterix is also a major reason for investor interest in the stock. The investment indicates the faith in the future prospects of the combined entity. Frost's investments in the pharma / biotechnology sector are well known, and his recent investment in Biozone (BZNE) is also promising. Biozone owns the high potential proprietary drug delivery technology QuSomes. The merger is expected to help TransEnterix enhance its ability to commercialize flexible minimally invasive surgical technologies. Joseph Slattery, who joined the company recently, is expected to help in development and commercialization of SurgiBot as he has relevant experience in medical technology companies. However, it is important to remember that the potential of the merger will be realized only over time. The positive results will take time to get reflected in the top or the bottom-line. Since the stock has already appreciated significantly over the past 7-8 months, it is good to remain a bit cautious. However, the power Frost's support should not be ignored, and it is possible that the stock starts another leg of uptrend.
The stock has remained sluggish over the last one month and has not moved much. The earnings were better than estimates, but the crash after the court ruling has dented the sentiments. The volumes have been relatively low. There is not much momentum building on either side, and the stock seems to be looking for triggers. The earnings are a few weeks away, and that could give it decisive direction for the short term. The company needs to beat analyst estimates in the earnings so that the growth momentum resumes. The level of shorts is high at around 9.3% (3.79 million shares). Based on the average volume of around 307K for the last three months, the days to cover are also high. Positive triggers could have a more exaggerated effect due to this. Thompson Reuters recently upgraded the stock to buy. The consensus rating for the stock is also buy, with price target around $49. That indicates significant upside potential for the stock. The company is expected to do well based on the expected growth in the market. The patents which Interdigital possesses provide it with a stream of revenues through the licensing agreements. Companies are more conscious about optimizing the value of their patents. Spherix (SPEX) has recently filed lawsuits against companies like T-Mobile (TMUS) and Vtech (VTKLY) to enforce its patent rights. The last couple of years have been particularly good for this. Interdigital has a strong balance sheet. The cash position is great as the company had $770 million as on June 30. The debt is relatively low at $204 million. The price to sales and price to book ratio is around 2.39 and 2.96 respectively, and P/E is not strictly comparable due to abnormally high EPS in Q3'12. Hopefully, the earnings will improve the sentiments.
An article on seekingalpha recommends to buy the stock for its long term potential. The author believes that it is well positioned to take market share from other U.S. carriers. The aggressive marketing, improved network experience and a full range of smartphones make the outlook positive. The performance in the second quarter was relatively good and there was sequential increase in revenues with addition of postpaid subscribers. Second half of 2013 is expected to be better as far as ARPU is concerned. The smartphone sales are expected to drive subscriber base and ARPU. Most importantly, the company is gearing up to take the market share from the other two giants due to less restrictive and lower priced contracts. The acquisition of MetroPCS is expected to unlock synergies by reducing the roaming and backhaul costs and the savings are expected to be between $800 million to $1 billion. Reduced employee costs and lesser bad debts also indicate improvement in efficiencies. However, there is a major risk of increased aggression by competitors like Verizone (VZ). AT&T's (T) acquisition of Leap (LEAP) is also expected to increase competition in areas where they are operating. So there is likely to be pressure on margins as the competition is likely to be more cost based. Even other analysts are predicting that the two giants are likely to find it increasingly difficult to maintain market share in view of the competition. Further, recently Spherix (SPEX) has filed a patent infringement lawsuit against the company. Hopefully, the next few quarters will indicate better performance by the company, and the acquisition of MetroPCS will improve the margins. The company has manged to expand its coverage and increase its spectrum. The current P/B and P/S is relatively low, and the author believes that there is good long term potential in the stock.
The stock has remained stuck in its range and is unable to make any significant move. An article on seekinglpha mentions Niaspan's launch as an important achievement for the company. The annual sales of Niaspan were $1.12 billion as of June 2013. This drug is expected to boost the performance of the generic business. In addition, Teva has a pipeline of several generic drugs which are likely to be launched later this year. The author contends that the launches will make up for the weak performance of first half of 2013. Teva also became the first company to receive FDA approval for marketing and developing the generic version of Roche's (RHHBY) cancer drug, Xeloda. Even this drug is expected to boost Teva's declining sales. The author mentions that the company is trading at a low price to sales ratio of 1.60, and the contribution by its new generic drugs will help increase the stock price. The next few quarters will indicate whether the potential related to these and other drugs will actually translate into higher revenues and better margins. The expected decline in sales of Copaxone next year onwards will add to the pressure. However, the stock has always found support around $36, and shows resilience to bounce from those levels. So improvement in fundamentals may help turnaround the sentiments pretty quickly. There are high hopes from the new CEO, and the backing of Dr. Frost is always reassuring. Recently, several of the companies where Dr. Frost has a stake have done extremely well. He always explores possibilities of collaboration between his companies e.g. OPKO Health (OPK) is actively working to explore possible uses of Biozone's (BZNE) proprietary drug delivery systems (QuSomes) to improve cost efficiencies in manufacture of formulations. The next few quarters will be crucial for Teva and hopefully the new drugs will help the company arrest the declines.
The stock has been a bit volatile recently. It has seen high volume days with good increase in price, but there is some selling pressure at higher levels. The companies where Dr. Frost has a stake have been doing well recently, and Castle brands is also expected to do so. A recent article on SA mentioned that in view of the improving performance and potential of the sector, the company may be able to post better numbers going forward. The author stated that there are associated risks, but those with a long term perspective and the required risk appetite may consider starting a position in the stock. He mentions that the company has yet to turn a profit after 14 years of operations, and has an accumulated deficit of more than $130 million. So there is a lot of risk associated with this stock especially with liquidity and dilution concerns. But with the expected profitability by March 2014, experienced management, and expected high sales growth, these risks could subside over time. Castle Brands has a strong portfolio of premium brands, and has strong potential for developing a break-out brand success and attract new premium brands. He also mentions that the stock price recently broke out of its 7 year downtrend and is now on the rise. It could cross $1 if it is able to achieve profitability by early next year. Most importantly, the support of Dr. Frost is reassuring as he has a track record of selecting high growth stories when they have not been noticed by many others. One of his investments Biozone Pharmaceuticals (BZNE), which owns the high potential QuSomes drug delivery technology, has been in news recently for its extremely high potential. Those with long-term perspective can be with Castle Brands, but should remain aware of the risks associated with such investments.
The stock has moved sharply after the announcement of the Microsoft (MSFT) deal. The cash offered by Microsoft for Nokia's devices unit has been factored in the price. As mentioned in an article on SA, after the deal is completed in Q1 2014, nearly 40% of the market cap (at existing price) will be comprised of cash. That significantly limits the downside for the stock. Analysts are relatively more optimistic about the future of the company, and the company is expected to do much better financially. The balance sheet will be stronger, and the overhang of the loss making business unit will improve the sentiments. The devices business was not showing signs of sustainable improvement, and the competition is increasing. The smartphone market is getting crowded, though it is still largely ruled by players like Apple (AAPL) and Samsung (SSNLF.PK). Even used devices are increasingly being preferred, and the resale value of Apple products is a source of competitive advantage which companies like Nokia do not possess. Usell (USEL), a company which provides a platform for buying / selling used phones, reported great growth in revenues recently. So while the manufacturing unit may make sense for Microsoft, for Nokia it was good riddance. The patent portfolio of Nokia is expected to bring in revenues, and additionally, Microsoft will pay them a substantial sum over the next 10 years. Other business segments like the Nokia Siemens Networks area also expected to do well in the medium to long term. So with the sale, the analysts perspective about the company will change over time. Nothing great can be expected in the short run because the stock has already moved quite a bit, but long term prospects are better. It will now need to deliver on its other businesses so that investor confidence returns.