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A recent article on seekingalpha is particularly positive about the stock. The author contends that the innovation pipeline of the company, backing of billionaire investor Dr. Phillip Frost, and a huge short buildup can lead to increased demand for the stock in the near future. The stock has already appreciated significantly over the last few years. As per the author, OPKO's aggressive acquisition strategy has brought together a very large suite of products under development. The products provide synergies and address a wide range of specialty markets. OPKO recently completed an all-stock acquisition of PROLOR Biotech, which is mentioned as a positive for the stock. The recent volatility of the stock has been attributed to the high short interest. On the other hand, it is important to remember that the stock trades at 35 times sales and 9 times its book value. The company has never been net positive, and there is a huge accumulated deficit of $426 million. The debt is also relatively high if one considers its revenues and negative margins. So the stock has already factored a lot of the future potential of the company. Backing of Dr. Frost provides comfort that financing should not be an issue. The company had around $169 million in cash which is good considering its burn rate. OPKO's 4KScore diagnostic test is expected to generate annual recurring revenues of around $1.8 billion in due course, though this figure is based on estimates only. If this turns out to be true, then all the negatives in the balance sheet can be wiped out pretty quickly. Dr. Frost is looking for synergies between OPKO and Biozone (BZNE), another of his companies. OPKO itself has invested in the company and has an agreement with Biozone. Biozone's proprietary drug delivery technology (QuSomes) can help in reducing cost of manufacture of formulations. So there could be some catalysts for OPKO in the short term, but one needs to remain a bit careful in view of the recent appreciation in the stock.
Teva has not done much for the investors over the last few months. It has remained range bound between $36 and $42. Over the last few years, the net income has declined sharply from $3.33 billion in 2010 to under $2 billion in 2012. The revenues have increased from $13.9 billion to $20 billion. Fundamental performance of the company over the last few quarters has also not been great. The legal settlement costs have crushed the bottom-line, and even the gross margins have not shown any remarkable improvement. The recent weakness in the stock is related to the expected decline in sales of Copaxone due to expiration of the patent next year. Copaxone contributed more than 22% of the $4.9 billion sales in Q2'13. Any dent in this is likely to adversely affect the financial performance. Goldman Sachs and Morgan Stanley have downgraded the stock during the last couple of months. This has added to the pressure, and weakened the sentiments further. The stock price has been declining since April 2010 when it was around $64. There are hopes that the CEO will be able to make significant positive changes in the strategy, and achieve more operational efficiencies. However, it may take some time to see the effect of the changes in the financials. He has to contend with the debt problem as well. The Chairman Dr. Frost has expressed confidence that things will improve in the near future. He has been exploring synergies between the companies where he has a significant stake. His firm 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. TEVA is also working hard to improve cost efficiencies. The rest of the world markets (outside US & Europe) also provide it with tremendous opportunities.
Q2'13 earnings led to a slide, and the stock has corrected significantly over the last few weeks. Now it is around crucial levels, and it is important that there is a bounce soon. The company reported a net loss of around $2.6 million in Q2. In the first half of 2013, the company reported a net loss of $9.78 million, which was slightly lower than the $9.85 million net loss in H1'12. The sales increased by 40% during the same period from $38 million to $53 million. So there has been improvement in the first half, but the company is still a bit far from reporting a net profit. An article on seekingalpha was positive on the stock. It mentioned the usual risk factors as well so needs to be read in totality. As per the author, there are some reasons which make a case for investment in the company. The partnership with Costco (COST) is expected to increase sales as it will significantly increase exposure to the mass of consumers that shop at Costco sales. Further, the partnership with Arnold Schwarzenegger will help the company increase sales, especially in the international market. International sales comprised 38% of the revenues in Q2'13. The company recently announced its partnership with Europa Sports Products to distribute the Arnold Series products in North America. Listing on NASDAQ will be a major catalyst, as the volumes will increase and large investors, especially those who follow Dr. Phillip Frost's investments, will surely like to track the progress of the company. MusclePharm recently invested in Biozone (BZNE), another company in which Dr. Frost and his company OPKO Health (OPK) have a stake. In any case, sales growth has never been a problem. What is required, is for the company to report a few quarters of net profit. That will change the outlook and investor perception.
The stock has done well over the last couple of sessions. The recent investment by MusclePharm (MSLP) has been a catalyst. MusclePharm has put in $2 million in Biozone, and is evaluating the possible benefits of BioZone's proprietary QuSome technology for enhancing the absorption and speed of delivery of its supplements. This is likely to increase the efficiency and efficacy of MusclePharm's supplements. Dr. Phillip Frost has a substantial stake in MusclePharm, and has already invested in Biozone. Another of his companies, OPKO Health (OPK), had also invested $1.7 million in Biozone last year. OPKO has a license agreement based on which it has world-wide license for the development and commercialization of products utilizing QuSomes. The rights are exclusive for OPKO in the field of ophthalmology, and non-exclusive in other fields. Qusomes have several potential uses in the pharma and cosmetic industry. QuSomes were discovered by BioZone founder Dr. Brian Keller in collaboration with Dr. Dan Danilo after years of research. This molecule enhances membrane penetration capabilities of ordinary creams, and can also be used to enhance delivery of drugs. The method of delivery can be used to convert conventional pills, tablets, and liquids into sublingual sprays. In the case of injectable drugs, the delivery is improved as Qusomes help enhance the solubility of the drugs. Some of the drugs are not easily soluble in water, and hence injectable formulations are not that easy to administer. OPKO is conducting experiments on behalf of pharma companies on various drugs which are not easily soluble in dissolving agents. Combination with Qusomes has given encouraging results, and hence there is potential for use in injectable formulations also. Unlocking all this potential can lead to huge gains for Biozone in the near future. The fact that Dr. Frost and his companies have invested in BioZone helps increase the confidence.
The stock has remained volatile after the earnings. The volumes were particularly high a few days ago when the stock fell sharply from around $1.93 to $1.67. It has recovered a bit, but the rallies are not so believable anymore. The earnings were nothing great, though the management continued to show optimism about the future. Net loss from continuing operations increased substantially on a yoy basis, though sequentially, there was a decline the fourth quarter loss. Importantly, the loss from continuing operations in the full fiscal 2013 was $39.6 million compared to $8.1 million in the full year 2012. Stock based compensation comprised $7.7 million of this loss. As per the CEO, "This past quarter we continued to build on our licensing efforts and have made significant progress in expanding the number of discussions underway. In addition, at the end of June we executed a capital raise and in July we completed the transformation of our board of directors, both intended to support our long term IP strategy. With these changes in place, we believe we have fully transitioned the company to a licensing business." So the liquidity position is better, which gives more options to the management to execute its long term strategies. The offer price was also not too much below the current levels. However, there has been no concrete guidance on when the licensing strategy will lead to a sustained stream of revenues for the company. Licensing is a preferred mode of monetizing patents, and recently Marathon Patent Group (MARA) began to realize substantial revenues related to its IPR portfolio. For Unwired, the weakness seems to be setting in, and there is increased selling pressure whenever the stock rises. There needs to be visible improvement in the financial performance soon otherwise the stock may go even lower from current levels.
The earnings led to a strong correction in the stock. After such a huge appreciation, there was always a risk of a negative reaction. The earnings were good, and the company did better than estimates. However, the guidance was a bit conservative. An article on MotleyFool is particularly positive about the stock. The author contends that the post-earnings weakness is an opportunity to buy the stock. He considers the company's entrance into vehicles as an unspoken catalyst that gets little coverage. The earnings were good especially because of the revenue growth, slower increase in content acquisition costs and good growth in RPM. Pandora's entry into the vehicles provides a huge opportunity for growth in revenues. An article on SA is positive about possible improvement in fundamentals over the next few years with revenues reaching $2 billion by 2016/2017. The company is expected to achieve meaningful profitability by that time. However, the author recommends to wait before making an entry because the stock has already run up quite a bit during the past year, and the company will have to contend with challenges on the profitability front in the short term. This is mainly because, though the content acquisition costs declined, the sales and marketing expenses increased as a percentage of revenues. The existing and expected competition will continue to keep these costs high. There are opportunities in emerging trends in other segments of advertising. A survey conducted by IZEA (IZEA), a company active in social media sponsorship, recently pointed to the saturation in online display ads and growth in popularity of native advertising. Pandora is expected to do well in the coming few years, though the possibility of achieving net profit in the near term is not very high. The recent correction has made it a bit more attractive, but it is extremely important that there is a strong rebound soon. A sustained drop below current levels can take it much lower.
The correction has run very deep. It is now more than 22% below the recent high of $14.25, and has done much worse if one compares it to the 52 week high of $17.39 made in May. The earnings were better than estimates, but that did not help matters at all. The company beat the EPS estimates and the revenue guidance. Perhaps, a few more quarters of good performance can lead to improvement in sentiments for the stock. It is important to note that 2012 was better than earlier years as the revenues had grown and the loss had reduced. In 2013, going by the guidance, the revenue growth is expected to continue. For 2013, the guidance is for revenues in the range of $515-$520 million and adjusted EBITDA between $29.5-$31.5 million. Currently, the company carries a minor net loss on a ttm basis. For starters, it needs to beat the guidance for Q3'13 (revenue $130.5-$132.5 million, and adjusted EBITDA $6-$7 million). Growth in revenues is difficult as the company faces competition from the bigger players like Google (GOOG), Yahoo (YHOO) and Microsoft (MSFT). Social media sponsorship / native advertising is another fast growing segment with companies like IZEA (IZEA) doing well recently. The company needs to leverage the power of some of the high growth emerging trends. The competition makes it difficult for the margins to improve. So the hard work needs to continue and the new leadership may be expected to do something special to take the company to the next level. The good part is that it is a company close to breaking even. It has zero debt and a $81 million cash. So, after such a big correction, a few more good quarters can have a remarkable positive effect on the stock price. Hopefully, we will see a bounce from the current levels soon.
The stock seems to have stabilized after a small correction. It had appreciated after the earnings, but found it difficult to cross the stronger hurdles. The volumes have been tepid, but still there are signs of stability. The next few weeks will determine whether it can cross the recent highs. It will require a strong push for it to be able to do that. There has to be a trigger in the form of positive news flow. In any case, the investors may be happy with the performance over the last one year, though it still has a long way to go to reach the price in 2011. It has appreciated by 146% over the past 52 weeks, but it is still down 60% since 2011. Last few quarters have been good as far as improvement in fundamentals is concerned. An article on seekingalpha mentions that, despite the strong appreciation in the stock in a short period of time, there are no signals to short the stock. The author is positive about the stock because it has managed to beat analyst estimates in the last two quarters, and is showing signs of stability after a long time. The company has benefitted from the local and mobile trends of e-commerce, and is also focusing on its goods business. Amazon.com's (AMZN) Local is likely to be a major competitor and eBay (EBAY) is another giant to contend with, especially in the goods business. For the uptrend to continue, it is important that the company continues to deliver good performance in the next few quarters. Groupon will need to remain dynamic and open to look for strategies to improve the revenues and margins. Native advertising is gaining popularity. IZEA (IZEA), a company in this space, has done well recently. Groupon, has another 60% to go from here to reach the 2011 levels. If the trend continues, it may get there, eventually.
Yamana Gold has done great over the last few weeks. It is 35% above the 52 week low made in June. Importantly, it has survived a strong correction in July-August which was pretty severe and had taken it nearly to the June lows. Now it is again correcting, and it is important that the current levels hold and there is a strong rebound. Same applies to gold which is looking a bit quiet and unsure after the strong moves recently. A correction is surely due, and that may take it to important supports. The recent dip in gold indicates that there could be some period of relatively less activity. However, for that the important levels need to hold. Stock of other companies have also shown similar patterns. Some of them have appreciated 50-60% from the lows. There are also some stocks which have under-performed. The movements are showing divergence, and have become a bit company specific. Yamana's earnings were not too great, but valuation metrics will improve if the prices remain firm and the cost control measures of the company continue to yield good results. The trailing P/E (ttm) is nearly 27, and the forward P/E is ~19. The price to sales is 3.92 and price to book to book ratio is 1.11. The rise in gold price has improved the sentiments tremendously. There have been some investments in the sector which indicate growing risk appetite at current levels. Pershing Gold (PGLC) a development stage company recently obtained $20 million funding led by insiders which may help it start production next year. For Yamana, the all-in sustaining costs need to show more declines. Further, the debt needs to be kept under control. Going forward, the action is likely to be more stock specific, and Yamana will be preferred if it can show improvement in its fundamentals compared to peers.
Harte-Hanks has corrected by 17% from the recent high of $10.12 made just before the Q2'13 earnings release. The correction has been pretty sharp as the decline has taken place over 4-5 weeks. The results were not bad as the company did better than analyst estimates. It reported a profit of 13 cents per share compared to estimates of 12 cents per share. The correction has taken the stock below crucial levels and it seems that the weakness is setting in. It is imperative that there is a strong rebound soon otherwise the outlook may worsen. The stock is still up 38% on a ytd basis. The stock has been volatile over the longer term and the movement reflects the financial performance. The revenues have gone down and the net income has been erratic. On the positive side, the company has reduced debt over the last few quarters. The dividend yield is high at around 4%. This is a strong reason for owning the stock provided the stock shows improvement in earnings consistently. If the company is able to improve its performance over the next few quarters, then the stock may do better. Perhaps it has to beat the analyst estimates by a wider margin. Basically, lack of consistent improvement in fundamentals is weighing the stock down. Competition in the sector is high, and the field is dynamic. The company has to continuously adapt to the challenges posed by various segment of advertising. Social media sponsorship / native advertising is gaining popularity with companies like IZEA (IZEA) active in the segment. The giants like Google (GOOG) & Yahoo (YHOO) are highly innovative and extremely active. Earnings for the next quarter will be important. Continued good performance will increase the confidence. Investors would like to see more consistency in performance to consider the stock for long term investment.
Primero has done great recently with 39% appreciation from the low of $4.06 made in end June. This is on the back of good appreciation in the prices of precious metals. Gold has appreciated 18% from $1200 per ounce to above $1400 within 8-9 weeks and silver has done much better with 28% rise from the lows within the same period. Primero is one of the lowest cost producers in the industry, and that will increasingly get reflected in the numbers of the future quarters if the precious metals continue to remain stable. As per a recent article on seekingalpha, 'Primero Mining is a fairly valued gold mining company with solid properties and reasonable plans for growth.' The sentiments in the sector are much better now with the gloom dissipating. In a higher price scenario, companies like Primero will be a preferred company as it will have higher margins compared to peers, and its balance sheet is also stronger. The debt is only $32 million, while the cash on books is around $130 million as on June 30. The price to book ratio is 0.95 and trailing P/E is around 16. Analysts at RBC Capital have upgraded the stock to outperform with a PT of C$7. Analysts at Scotiabank have cut their price target from C$8.00 to C$7.25 in early July. The recent earnings were better than estimates, and analysts may turn more positive on the stock going forward. Further, if gold moves by about 5% higher from here and maintains those levels, then the outlook will improve dramatically. Even now, the outlook has changed tremendously with more investments expected in the sector over the next few quarters. Pershing Gold (PGLC), a development stage company, recently obtained $20 million funding which could help it start production next year. As sentiments improve, one can see more stock specific action with stocks like Primero being preferred by many investors.
The sharp move in gold beyond $1350 has changed the sentiments significantly. It is now trading around $1400 and seems to be relatively quiet. On the back of this 18% move, several stocks have appreciated by more than 40-50%. Some have done even better. New Gold has underperformed this trend and is only 18% above the low made in end June. The stock has corrected sharply over the last few sessions. It had moved above important levels, but could not hold the highs. It is reasonably placed on most of the important valuations metrics, but the debt seems to be a bit high for a company of this size. The good part is that the cost of production is low and the all-in sustaining costs for 2013 are expected to be around $875 per ounce. For New Gold, the costs showed a decline in the last quarter which is a good sign. The company has a net profit on a ttm basis. In a recent interview, the CEO of the company has stated that New Afton is a relatively high-grade mine and the company is fine with the prices at current levels. Better prices would obviously help in generating more funds for expansion, but it is likely to remain profitable even if the prices were to dip. In case price of gold rises, or even remains stable, the margins will expand and the numbers will look much better in the next few quarters. The mood is much better and there have been some investments in the sector which signal this. Pershing Gold (PGLC), a development stage company, recently got $20 million funding for its operations. Investors are keen on taking advantage of attractive valuations of those companies which have not participated in the rally so far. The action will get more stock specific.
Goldcorp is now 35% above the low made in June, and in the process, has come close to crucial psychological levels. The move is great, and there are some companies which have done even better with a 50-60% move from the lows. Gold has moved around 18% from the critical level of $1200, and the mood is much better now. In the process, it has crossed hurdles and seems to be much more stable than it was a few weeks ago. Improvement in sentiments is reflected by the fact that there have been some acquisitions and investments in the sector recently. Pershing Gold (PGLC), a development stage company, recently got $20 million funding which may help it start production next year. There have been other acquisitions by bigger gold mining companies to take advantage of the attractive valuations of development stage companies. Another 5% up move for gold will improve the sentiments dramatically. The sharpness of the move, especially after $1350 makes the case for a healthy correction / consolidation. That may help in making the base for an attempt to move higher. Political environment and seasonal factors may determine the move over the next few months, and gold is likely to find support during corrections. Goldcorp needs to keep its costs under control and also keep the debt at reasonable levels. These two metrics will be important in a stock specific market. Next few quarters are likely to be better if gold continues its uptrend. All companies are much more cost conscious than what they were two years ago, and that will help them in the long run also. Mines or mining processes with higher costs are being avoided. So the next few months may see more stock specific action based on the fundamental performance of the company. The low cost, better valuations and better balance sheet companies will be preferred.
The stock has corrected significantly after the earnings. Exposure to earnings is always risky, and has a 50-50 chance of success. It is more speculative than anything else. For RPXC, the revenue increased slightly from $55.2 million in Q2'12 to $57.5 million in Q2'13. Net income declined from $13.2 million (25 cents per share) to $10.7 million (20 cents per share) – a 20% drop. For the full fiscal 2013, RPXC management expects total revenue in the range of $229 - $235 million, and net income (non-GAAP) - $50 - $53 million, which is actually an improvement from the earlier guidance. Zacks recently downgraded the stock and has a PT of $20.30, while analysts at Barclays Capital had raised their price target from $17.00 to $18.00 in early July. Despite the correction, the stock has done well over the last few quarters. It is up 35% on a 52 week basis, and 61% in 2013. Correction has improved the valuations slightly, and now the stock is trading at a P/E (ttm) of nearly 19 (forward P/E 14.8). There was another article on seekingalpha recommending to buy RPXC. The unique business model of RPXC and its expanding economic moat are the main reasons for the author's positive opinion on the stock. RPXC helps the companies avoid costs by mitigating patent litigation. This is important because litigation is time consuming and costly. Patents monetization is big business now, and even smaller companies like Marathon Patent Group (MARA) have been able to enforce settlements against bigger companies. The author considers RPXC as undervalued as the entire company can be bought for less than the cost of its patent portfolio. The article also mentions some risk factors, and hence needs to be read in totality.
A recent article on seekingalpha is remarkably positive on Acacia. The author contends that Acacia is a long misunderstood company with low valuations compared to its peer group stocks, high level of underused intellectual property, high capital, little direct competition and strong balance sheet, with at least 25% of market capital in its balance sheet. The article is interesting and gives good information about the industry and the company. The potential of the company is evident from the performance over the last few years. It has grown at an exponential pace, though the last couple of quarters have been particularly bad. The stock performance has also not been very good as it has remained volatile, and declined over the past couple of years. The opportunity is immense as more and more companies are realizing the potential of monetizing their IPR assets, but they do not have the capability to do so themselves. Acacia offers the required services for these companies to achieve their objective. Patent monetizing business has grown tremendously over the last few years with even smaller companies like Marathon Patents Group (MARA) taking on bigger companies like Cisco, Dell etc. However, the potential of Acacia has to be reflected in the earnings of the next few quarters otherwise the sentiments may deteriorate. So far, the stock has shown some resilience by taking support around $20-21. Those levels need to be kept in mind. The correction in the stock has made the dividend yield much better. However, even dividends ultimately depend on financial performance, and payouts from reserves cannot be sustained. The performance in the next quarter will be crucial, and the good part is that the expectations will be much lower at that time. Some may like to see its performance in Q3'13 before considering a dip for the long term.
The stock has been a bit more active after the announcement of the $11.1 million funding. The funding was again led by insiders like Barry Honig. So the company is in a much better position compared to where it was before getting these $20 million dollars. It is closer to starting production, and rallies in the stock may become more sustainable. Management commentary has been very positive. It needs to give a more clearer timeline related to the start of production. That will move the needle substantially. Further, the amount of money being put by Barry Honig at market price of the stock indicates that he expects better days ahead for the company. There have been investment in development stage assets by bigger players recently. The bigger players are attempting to take advantage of the low valuations. The improving outlook for the gold mining sector is also majorly responsible for this. Gold has moved up smartly over the last few weeks, and has crossed important hurdles. There will be corrections down the line, but the important levels may be expected to hold. A healthy correction, with a strong rebound will improve the outlook even further. The gold mining stocks have appreciated smartly with some of them gaining more than 50% from the June lows. Development stage assets may not have participated in the rally too much, but there may be more stock specific action in the near future. Pershing is expected to have very low all-in cost of production, which may make it a preferred bet compared to other companies. It does not have debt on books and has high level of cash. Insider ownership has increased recently, and the top management is considered extremely experienced in the game. Hopefully, improved sentiments in the sector and the recent funding received by Pershing Gold will help increase investor interest in the stock.
It could be that the stock is just taking a break after a fantastic run. Surely, the opposite could also be true and the correction could run deeper, especially if there is no rebound immediately. This is because it has broken crucial levels during the last few days. The top is pretty much known around $920, and it will take some great news to go beyond that. So the party is not as chirpy as it was a few weeks ago. The earnings were not exceptionally positive, and there were some metrics which were not as good as analysts would have liked. Like it or not, opinion of those people does matter, and a few cents of deviation in earnings can be punished with multi-million dollar drop in the market capitalization. So the company has to deliver something special in the next earnings so that the stock can regain the momentum. Slippages can lead to more trouble. There are other risks also like those privacy related lawsuits and the patent infringement lawsuits. The patent monetizing marked has grown extremely fast with even smaller companies like Marathon Patent Group (MARA) taking on huge companies like Cisco (CSCO), Sony etc. recently. While these may not be game-changers, they may have temporary negative impact on the sentiments. Based on past performance, and the aggressive strategies of the company for the future, the long term story should be great. It acquired the smart watch maker WIMM Labs to take on competition from Apple (AAPL) and Samsung. Further, it had also acquired other companies which will help it build upon its competitive advantage. Growth in usage on mobile will increase the overall usage of internet and also the usage of Google products and services. So there may be glitches and corrections, but all stocks have to survive these periods.
A recent article on seekingalpha by Greg Miller analyzes Marathon Patent Group for its future potential. The author, who owns the stock, recommends to buy the stock. He states that the recent decline in the stock is a good opportunity to get in because the company is expected to turn profitable very soon. The $1.5 million revenue earned by the company in Q2'13 is a sign of the times to come. The management has not disclosed the exact amount of expected revenues from the 7 settlements and the other possibilities in the next few quarters. This confidentiality is explainable in view of the nature of settlement agreements. However, one can extrapolate the performance in Q2'13 to a certain degree. Since the average cash burn rate is around 400K per month, it has sufficient cash to last it more than a couple of years. Further, it may turn profitable as the gross margins are extremely high. The amount of settlement revenues will be evident from the performance in the next few quarters. The low float of 2.7 million shares (out of 5.3 million shares outstanding), makes it easier for the price to appreciate if the performance is good. The author expects a 50% appreciation in the stock by 2014. A part of that appreciation is expected based on the exercise price of $6.50 for the warrants issued. Marathon has no debt on books, and it has $6.4 million cash ($1.2 per share). The recent investments by institutions at $5.2 puts some limits on the downside. The company currently owns 4 patent portfolios, Sampo, CyberFone, Relay and Bismarck out of which the first three are already generating settlement revenue, and Marathon is working with its partner IP Navigation to monetize the Bismarck portfolio. However, the article also mentions some of the risk factors associated with such investments, and hence needs to be read in totality.
The earnings led to a fall in the stock, and it has not been able to recover yet. The numbers were better than expected, but the guidance was muted. Decent growth in US was not supported by the performance in Asia and parts of Europe. Software and equipment for datacenters and corporate cloud networking is not growing as per the expectations. Product revenue improved more than expected, but service sales increased less than anticipated. The sentiments are weaker, and the job cuts have added to the worries. All this has led to increased uncertainty. The forecast for the current quarter is at the lower end of expectations of the analysts. Whether we like it or not, analyst opinion does matter. A few cents difference in the earnings makes a huge difference to the marketcap. For example, this time the EPS included a 3 cents charge related to TiVo patent litigation settlement. Cisco faces other lawsuits from the likes of Marathon Patent Group (MARA), and the recently filed case by Stragent LLC. Even small settlements from these can move the needle. The negative reaction to the outlook given by the management was exaggerated due to higher expectations built after the last earnings. At the time of Q3 earnings release, the management was more optimistic, and the stock had moved by 12% backed by more than 200 million shares volume. This time, the drop after the earnings was backed by 130 million shares. The good part is that the correction has given an opportunity to many long term investors. The valuations are better and the dividend yield is higher. Importantly, the expectations are lower, and hence the next earnings may not see a huge negative reaction unless there is something drastic. So a good company like Cisco can be expected to make a comeback. It is around crucial supports anyway. The overall market mood also will also be a factor to consider.
The Q2'13 earnings were nothing great. However, as per the CEO, the performance was good, and focus on top brands and reduced investments in lower margin affiliate and advertising activity helped it increase EBITDA to $18.4 million. The live Interactive business continued yoy growth with an increase of 4.0% to $24.1 million. There was no material progress on the debt restructuring. It is anyway difficult to get good terms when the company is making losses after losses, and has eroded its net worth completely. The accumulated deficit of $331 million pretty much tells the tale. Even the top line has been declining consistently during the last few quarters. For Q2'13, the revenue of $69.0 million was significantly lower than the $81 million recorded in Q2'12. The net loss was $10.3 million compared to $10.5 million in the same quarter a year ago. This also indicates the deteriorating financial position. The interest payments were $27 million compared to $21 million, so a good EBITDA will not do the trick anymore. For the first half of 2013, the revenue was $131.5 million compared to $152 million in H1'12. The net loss increased slightly to $20.9 million compared to $20.5 million. The interest expense increased from $42 million to more than $53 during the same period. The debt has increased to $544.1 million from $504 million in Q1'13. Unless the company is able to make a substantial improvement in the leverage position, the situation may get worse. Social media space is getting more competitive, and FFNT will not find it easy to maintain competitive advantage if the financial position continues to deteriorate. This is a very dynamic field with emerging players working hard to increase the number of users. IZEA (IZEA), a company in the social media sponsorship / native advertising space, posted record Q2 numbers recently. For FriendFinder, the outlook may have worsened with the Q2'13 numbers. Q3'13 will be critical.
The stock continues its amazing run. Those who followed the trend have made money. Others, who got stuck with insignificant things like valuations, may have been left behind. Ultimately, what matters is the capital appreciation, and LinkedIn has delivered on that front. So investors have been rewarded. The price targets of the analysts have increased, with some predicting $280. Nothing is impossible with LinkedIn, and that is a key lesson to learn from the stock. It is best to accept that normal metrics do not work here. Market cap to sales ratio is irrelevant, and declining margins are okay if the future is bright. Not to mention the insignificance of price to earnings ratios. The omniscient analysts predict $1.55 earnings per share for 2013 so the P/E is likely to improve anyway. The ttm EPS is 26 cents, but it will catch up. These metrics cannot be used in the normal sense to make it appear undervalued. So future potential is the most uncertain, but easiest way to justify the cmp. In any case, the growth in users is good, and it hardly has any major competitors. The users are likely to be more loyal than those on the social networking sites like Facebook (FB). The future monetizing potential is also huge as it has a lot of data. It keeps making additions / improvements to its site, to increase the number of users and the time spent by them. The mobile platform is likely to improve usage. The influencer program is popular, and the power of social networking is evident from the number of clicks some of the posts get. Native advertising / paid content also thrives on this ability of celebrities to influence. IZEA (IZEA), a company in this space posted record numbers recently. So tagging with LinkedIn is a great idea, but since nothing is impossible, a correction is also possible. But that is true for all stocks, irrespective of those insignificant numbers called valuations. And, the best case scenario will continue, forever, for LinkedIn.
The stock has not done much since the last earnings. This is despite the fact that the results were better than estimates, and the company posted a net profit after a couple of quarters of net loss. In any case, the stock has done well over the past one year with a 45% appreciation. However, it seems to be still recovering from the massive fall in June. On a ttm basis, the gross profit is $1.34 billion on a revenue of $2.95 billion. The operating margin on a ttm basis is around 10%. The ttm net loss is around $200 million, but that is mainly due to the $258 million impairment hit in Q4'12 on account of extinguishment of debt. The company needs to post a few more good quarters to be able to improve the sentiments. This is because the company has not done too well over the years as the revenue growth has been inconsistent. Even the bottom-line performance has been erratic. Further, the debt on books is high, and has increased over the last year. The cash position has also weakened over the last few quarters. So the investors may like to see more evidence of improvement in fundamentals. Q2'13 seems to be a good start. The outdoor advertising segment has the presence of big players like Lamar (LAMR) and CBS (CBS). Advertising itself is a dynamic field and outdoor segment has been facing challenges from online advertising. Concepts like social media sponsorship /native advertising are gaining importance. A company in this segment, IZEA (IZEA) recently posted record Q2 numbers. Clear Channel has to continuously adapt the changing marketplace to maintain its competitive advantage. If it can keep the debt under control, and post more quarters of net profit, then the outlook will improve. The power of a company like Clear Channel cannot be underestimated.
The stock has corrected by more than 14% after the earnings. The earnings were good as strong digital spending and good growth in emerging markets helped growth in revenues and net income. The operating margins also expanded slightly. As per a recent article on seekingalpha, Omnicom is likely to benefit from the rising demand for digital marketing. The merger with Publicis will help it become a leading media and communication company in the world, and, more importantly, it will enhances its digital capabilities. This is extremely important for the company to adapt to changing times and serve its customers better. The focus on emerging markets will help it achieve higher growth. As per the author, expansion in Asian and Latin American countries will help the company improve its EPS by around 7.3% to $3.86 per share this year and $4.27 next year. The company has done well over the years with steady growth, and is expected to do better after the merger. Though there are other voices which say that the merged entity will lose some big clients because the two companies service rival companies. For example, Omnicom serves PepsiCo (PEP), AT&T (T), and Microsoft (MSFT), while Publicis serves Coca-Cola (KO), Verizon (VZ), and Google (GOOG). The exact impact of these aspects can only be known later. Advertising industry has a fast changing landscape, and online advertising is gaining importance. Native advertising / social media sponsorship is also becoming a preferred method to influence customers. IZEA (IZEA) a company in this space recently posted record numbers. The merger will help the company gain access and insights about other segments of the market so that it can alter its strategy accordingly. The synergies may help enhance the competitive advantage. This may translate into faster growth in revenues and net income.
A recent article by the CEO of IZEA on Forbes brings out some interesting statistics which highlight the enormous potential of sponsored content / native advertising. As stated by the CEO, native advertising / sponsored content has now become more acceptable, and a preferred way for advertisers to reach out to potential customers. As per a recent survey conducted by IZEA (with 10,000 influencers and marketers), more than 92% of social media influencers said that they had or would accept compensation from an advertiser to promote something through their social accounts. Even the balance 8%, were mostly willing to do so if the compensation was high enough. 52% of marketers surveyed said they had compensated someone for a sponsored tweet, and 51% said that they had engaged in a sponsored blog post. The social media sphere makes celebrities out of ordinary people, albeit in their own sphere of influence. Smart brands are building an influencer ecosystem around their company. Over 60% of companies now say they have a standalone social media budget, and have compensated a social media influencer in exchange for a mention in an influencer’s social media stream. So influencers can surely help start the conversation about a product, though ultimately the success will be based on merits. Further, the online advertising, especially display advertising field is getting saturated, and most of the online influencers make more money from sponsorships than display ads. As per eMarketer, native ad spending will increase from $1.63 billion in 2012 to $2.85 billion by 2014. Social media sponsorship provides better value for money to advertisers. As the market matures, more methods, virtual events etc. will be created to exploit the potential of native advertising. Considering that the field is only a few years old, the potential is likely to increase exponentially. IZEA has a headstart in this field, and may be in a better position to leverage the potential.
The stock has done extremely well over the last few months. It is around 55% above the June low, and 65% above the 52 week low made in April. This is much better than several peers in the sector. Gold has moved by 18% in two months, and most of the stocks have moved 40-50% on the back of that. The good part about Alamos is that it is one of the low cost producers of the industry, and has a relatively better balance sheet. There is no debt on books and the cash position is also good. Further cost reduction will help the company do even better in future quarters, provided gold holds its levels. A correction is quite possible because of the steep rise, but hopefully the important levels will hold after the profit booking. The stocks may correct more than gold, as they have risen much more than gold. Correction will be healthy and will make the rally more sustainable. The outlook has improved significantly, and now long term investors are considering select gold mining stocks for long term investment. Marc Faber reiterated his preference for gold stocks and named some specific stocks in an interview recently. There are signs of increased confidence, and Pershing Gold (PGLC), a development stage company, recently obtained $20 million in equity funding which may help it start production in 2014. Companies like Alamos will be preferred in a higher price scenario. The current valuations are high, but improved margins in future quarters may reduce the pressure on that. Analysts are quite positive on the stock, and the consensus rating for the stock is buy, and the target price is C$17.42. Not to say that nothing wrong can happen, but it may have become a buy on dips kind of sector. After such a huge rise, one has to be careful and stock specific.
The recent spike in prices of gold has done wonders for the outlook. Now gold is up 18% and the stocks are up more than 40-50% above the lows made in June. Agnico has been an under-performer, as it has appreciated by around 28% from the lows. Many of the lower cost producers have gained more, though there are some larger, higher cost companies which have done better. The momentum in gold may take it a few percentages higher, but it is important to remember that a correction is due. The stocks may also correct on profit booking, but the important levels are expected to hold. A minor correction is required so that the rally becomes more sensible and believable. In any case, the rise has changed the outlook, and the utter gloom has dissipated. There has been a marked improvement from the sentiments prevalent in June. Not to say that nothing can go wrong, but one has to keep the faith. Those who bought around the June lows have been rewarded with good gains. Investment in mining companies may increase if gold survives a correction with a strong rebound. Pershing Gold (PGLC), a development stage company, recently obtained more than $20 million in equity funding. These are small signs that people have faith in the future of gold. For Agnico, there is scope for reduction in cost of production, and it is important for the leverage to remain under control. The company expects a significant reduction in capital expenditure in 2013 and 2014, which may help in reducing the all-in costs. The costs are already lower than the industry average. Even at current levels, the dividend yield is very good. So if there are visible improvements on these metrics over the next few quarters, then Agnico may become a more preferred bet of some long term investors.
IAG has appreciated by nearly 68% from the 52 week low made in June 2013. This is nearly 4 times the 18% appreciation in gold during the period. The stock has appreciated by more than 20% after the Q2'13 earnings. The company was able to achieve 55% of its cost cutting target for 2013 in H1'13, and hence lowered its cost guidance. The company is on track to reach the $100 million target by the end of 2013. Total cash costs guidance was reduced to $790-$840 an ounce from $850-$925 an ounce. All-in sustaining costs guidance was reduced to $1150-$1250 an ounce from $1,200-$1,300 an ounce. However, the All-in sustaining costs in Q2'13 were $1,196 an ounce, which was an increase from $1083 per ounce in Q2'12. Even for H1'13, the costs came in higher at $1239 per ounce compared to $1057 in H1'12. The production guidance was maintained. The net loss of $28.4 million included $39.3 million in impairment charges related to marketable securities and equity accounted investments (at market value). The stock is now trading at ~17 times ttm earnings, and still remains at a discount to book value. Further increase in price of gold can lead to better times ahead, especially in view of the efforts of the company to reduce costs. The reduced cost guidance and higher prices of gold in Q3'13 may make things better for the company. Gold may touch $1470, albeit after a correction, and that will help in further appreciation of many stocks. Investments in the sector may increase. Recently, Pershing Gold (PGLC), a development stage company, obtained more than $20 million in funding which may help it develop its properties in Nevada and start production in 2014. So if gold can survive a few healthy corrections, then the outlook may improve decisively. Then one can pick stocks for the long term.
The Q2'13 earning report has led to renewed momentum in the stock. Now it is nearly 60% above the low in June, and has moved 20% after the earnings. The earnings were good considering the scenario in Q2'13. The revenues went up by 9.3% and the net income declined by 7.2%. The stock is no longer trading at a discount to book value, and the trailing P/E (ttm) is 33.45. The forward P/E (fye Dec 31, 2014) is 25.23, and the price to sales is also high at 5.35. This is a little high in comparison to peers. However, the low cost of production for Eldorado will help it post better numbers in future quarters if gold remains stable to positive. The debt is also low at $596 million and the cash on books is $746 million. The company has taken steps to reduce the capex / exploration spending for 2013. The exploration spending is expected to be $51 million compared to $98.5 million planned earlier. The Capital expenditure is also expected to be $430 million compared to $670 million envisaged earlier. The full Kisladag expansion is being deferred pending improvement in metal prices, while the initial production from Skouries, Perama Hill and Certej is projected are being delayed by one year. The production and cost forecasts have been maintained. Gold production for 2013 is anticipated to be 745K ounces and the cash costs are expected around $520/oz. This is in line with original guidance. Eldorado has been mentioned by several analysts as a preferred bet for its low costs. The 18% rise in gold has changed the sentiments remarkably. There have been investments in the sector. Pershing Gold (PGLC) recently obtained more than $20 million in funding which may help it develop its properties in Nevada and start production in 2014. Analysts are looking at $1470 for gold as the next target, but one can expect a correction before that.
The recent results gave a boost to the stock, and it has appreciated by nearly 24% after that. The company managed to report a net profit despite decline in gold prices. The Company's revenue declined 9.2% YoY to $93.3 million and the net income declined 41.5% to $21.6 million. The royalty and stream production was in-line with the company's expectations. The Company expects to receive a total of 215,000 to 235,000 gold equivalent ounces (GEOs) from its mineral assets, and $55 to $65 million in revenue from its oil & gas assets in 2013. There was no change in the guidance. Franco-Nevada is now nearly 50% up from the low made in June. It is above important levels, and looks good form more provided the sentiments continue to improve. The valuations are getting stretched, and now it is trading at 49 times forward earnings, and the price to sales is 16.4. This makes the valuations high compared to many peers. The balance sheet remains strong with nearly $800 million cash and zero debt on June 30. The net profit margin is also 18% on a ttm basis. Gold has moved by around 18% during the last two months. It has moved beyond crucial levels, and looks good for touching the next target of $1470. However, it will need to prove itself by surviving a correction. So far the move beyond $1340 has been pretty much non-stop. What this has done is improved the sentiments significantly, and investments in development stage assets have increased. Pershing Gold (PGLC) has obtained more than $20 million funding over the last few weeks which will help it further develop its project in Nevada and start production. One important aspect of the correction in gold over the last few quarters is that now companies are much more conscious about costs. That may help the companies in the long run.
The stock has corrected after the earnings. The revenues came better than expected at $9.5 million. Importantly, the mobile revenue reached an all-time high at $2.6 million. This was a 37% rise sequentially, and 98% rise on a yoy basis. The net loss also reduced from $3.8 million (11 cents per share) in Q2'12 to $2.1 million (5 cents per share in Q2'13. Cash and cash equivalents increased to $8.3 million. The company posted an adjusted EBITDA profit. The operating loss also declined sequentially from $7.12 million in Q1'13 to $1.96 million in Q2'13. The management was pleased about the increasing traction with the new mobile advertising products, especially after the launching of additional native mobile ads on iPhone in July. Native advertising impressions increased more than fourfold on that platform compared to the week prior to the launch. The recent launch of these units on Android, will also help it reach 90% of its mobile audiences with the highest-monetizing and best-performing advertising units. Native advertising / social media sponsorship is a fast growing market. IZEA (IZEA) a company in this space, posted record revenues recently. Meetme plans to sustain its mobile monetization gains through increased engagement and usage with significant new product launches over the next two quarters. The other metrics like monthly active users (MAUs) and mobile MAUs also increased significantly. Mobile average revenue per daily active user also increased 48 percent from $0.025 to $0.037 on a yoy basis. So there has been some improvement in the important metrics, and the financial performance is also getting better. Importantly, the transition to mobile also seems to be doing well. However, the company remains a bit away from being profitable on a net basis, and that is crucial for sustained appreciation in the stock. The stock has already appreciated significantly from the 52 week low.
The divestiture of nuomi is likely to have a positive impact on the company. Deutsche Bank recently downgraded Renren from Hold to Sell with a price target of $2.40, down significantly from $2.89 earlier. The slowdown in the gaming segment and soaring operational expenses due to continued hefty investment in Nuomi led them to believe that the operating loss will widen in the current year. So the sale to Baidu (BIDU) should be a positive. The analysts had also quoted lower than expected revenues and the guidance for a yoy decline in Q3'13 revenues as the main reasons for the downgrade. The Company expects to generate revenues in the range of $47 million to $49 million in the third quarter of 2013, representing 3% to 7% yoy decline. This guidance is significantly lower than the street, though these figures may change after the sale. The company quoted major delays in gaming pipeline for both online and mobile as the reasons. The analysts stated that the ad revenues had stagnated due to a shortage of inventory. Nuomi net revenues came in at $6.2 million, a 69.4% increase on a yoy basis. The operating loss was $34.7 million, compared to an operating loss of $22.2 million in the corresponding period in 2012. The operating loss came in higher than the recent preliminary estimate by the company for $29-$30 million. The operating losses have continued to increase during the past few quarters. Gaming is the mainstay of the company, and even online advertising (the other important contributor) is changing rapidly. Native advertising / social media sponsorships is picking up, and IZEA (IZEA), a company in this space posted record numbers recently. Meanwhile, Renren has corrected sharply after the earnings release, and is trying to recover. The sale of nuomi may give a boost to the stock. Renren is trying to make a transition to leverage the increased usage of internet on mobiles. That may take some time to result in improved performance.
The earnings were better than expected as the company posted a net profit of $21.3 million or 22 cents per share in Q2'13 compared to $13.9 million or 15 cents per share in Q2'12, an increase of nearly 53%. The analyst average forecast by Thomson Reuters was for 21 cents per share. Revenue increased by 6.5% to $324.7 million in Q2'13 compared to $304.9 million in Q2'12. This was at the high end of Lamar's estimate of $322 million to $325 million. The operating margin increased slightly from 21.2% to 21.6%. The forecast for Q3'13 was not too robust as the company expects revenue between $320 million and $323 million. This was perhaps one of the reasons for a muted response to the otherwise good earnings. Sequentially, the revenue increased nearly 15% from $283.48 million in Q1'13. In Q1'13, the company had posted a net loss of $6.16 million or 7 cents per share. Cash was around $118 million as on June 30, and the debt was $2.15 billion. Current ratio remained below one. The stock is up nearly 33% on a 52 week basis, and is significantly up from its 52 week low of $31.33 made in September. However, it has corrected from the 52 week high of $49.61 made in May. The company continues to try for a conversion to REIT, though the IRS is likely to take more time to decide. IRS is reviewing its policy on the matter. The company faces competition from companies like Clear Channel Outdoors (CCO) and from other segments of the advertising market, especially online advertising. Social media sponsorship / native advertising is gaining popularity, and IZEA (IZEA), a company operating in this space, posted record numbers for Q2'13 recently. Lamar is an established player, but needs to remain flexible and aggressive to maintain its competitive advantage.
Though the analyst estimates for revenue were missed, the earnings were good and the company managed to report growth in revenues and net income both sequentially and on a yoy basis. The revenue increased 3.7% on a yoy basis from $93.57 million to $97.07 million. The net income increased 151% from $2.81 million in Q2'12 to $7.07 million in Q2'13. In Q1'13, the revenue was $96.04 million and the net income was $5.93 million. The revenue estimate for Q2'13 was in excess of $101 million. For the full year 2013, the average analyst estimate for EPS is $1.79. The revenue through Take Shape for Life, the company’s direct sales channel, increased 10 percent in the quarter to $61.4 million. The revenue guidance for 2013 given by the company is $375 million to $385 million, and EPS is expected to be in the range of $1.70 to $1.80. The company recently announced plans to pursue the strategic sale of its existing corporate Medifast Weight Control Centers and transition them to the franchise model over the next 12 to 18 months. This strategic transition is likely to make Medifast more financially flexible, and expand faster in the future. Some analysts consider Medifast as having good growth potential with decent valuations. The company is targeting $1 billion in revenue by 2017 which implies an annualized compounded growth of 23%. It plans to achieve this through gobal expansion, implementation of the "One Medifast" program and focus on acquiring talent and developing employee's capabilities. However, competition in the weight management market is fragmented with numerous approaches to deal with the problem. There are the direct competitors like Weight Watchers (WTW) and Herbalife (HLF). New vitamin supplements to counter this problem are being developed. Chromadex Corporation (CDXC) recently launched a vitamin derivative (nicotinamide riboside) to tackle the problem. Medifast is an established player and can be expected to grow with the market.
The sentiments have become more negative after the second quarter earnings. This is the third time in a row that analyst estimates have not been met, and the earning release has led to a correction. Now the stock has corrected 37% from the 52 week high made in February, and made its 52 week low in the last trading session. This is despite the fact that the company was able to meet the EPS estimate. However, the topline came in slightly short of the consensus estimate of $284.28 million. However, after such a huge correction, the valuations have become better, and it ultimately depends on expectations of future growth. The growth rate for Vitamin Shoppe has not improved, and that is one reason for the negative sentiments. Further, companies like GNC Holdings (GNC) have higher margins because most of its products are proprietary. Vitamin Shoppe is more dependent on sale of other products. Comparatively, Vitamin Shoppe is better on P/E, price to sales and price to book, and it has no debt. It has decent expansion plans and has high hopes from the e-commerce segment. The management expects to open 50 new stores during the year. It expects low to mid single digit comparable store sales growth in 2013. Contribution from super supplements is also expected to help the growth. For improving margins and pace of growth, the company needs to identify new products with potential. Here, high growth potential offerings from smaller companies can be considered as better margins can be negotiated. Chromadex Corporation (CDXC) has launched a couple of high potential molecules recently. Vitamin Shoppe can look for other companies / products which may be more in line with its product line and growth strategy. Vitamin Shoppe needs to show marked improvement in the next couple of quarters to change the sentiments.
The earnings has led to a sharp 10-11% correction in the stock. It had made its 52 week high of $9.40 on August 6 just before the earnings. The last trading session saw a large drop backed by abnormally high volumes of 300K. This is against the average 3 month volume of less than 50K shares. There were no positive surprises, and the gross margins reduced from 23.8% in Q2'12 to 22.3% in Q2'13. The revenues increased by about 22% on a yoy basis from nearly $80 million in Q2'12 to around $97 million Q2'13. However, the net loss increased to $4.38 million compared to net loss of $4.3 million in Q2'12. This was against the trend of sequential declines in net loss over the last couple of quarters. Even the revenues declined sequentially. For H1'13, the sales increased to $194.99 million (compared to $163.47 million in H1'12). The net loss in H1'13 declined to $7.24 million or 22 cents per share ($10.286 million or 32 cents per share in H1'12). Third party products comprised nearly 80% of the sales. One important reason for correction was that the stock had already appreciated significantly over the last few months. This had made it important for the company to deliver a positive surprise in the earnings to maintain the uptrend. The correction can run deeper, and the next few quarters will be extra important for the company. If there are negative surprises, then the trend may change decisively. The company needs to increase the pace of growth in topline, and, more importantly, improve the margins. Here, high growth potential offerings from smaller companies may be identified as the margins are better in those deals. Chromadex Corporation (CDXC) has launched a couple of high potential molecules recently. Vitacost can look for other products which may be more in line with its product segment focus.
As per a recent report, the online weight loss service industry is likely to do well over the next five years. Recession had a negative impact on the growth from 2008-2013, but the growth rate is likely to improve till 2018. Improvement in the economy leading to larger disposable incomes / more discretionary spending is likely to have its impact. The performance of Nutrisystem over the last few quarters has been better than estimates. The improvement in the bottom-line has been particularly good, and it seems that the company will be able to post a full year profit in 2013. For 2013, the EPS outlook was raised, and is now expected to be in the range of 27 to 35 cents. For Q3'13, the EPS is expected between 8 to 13 cents per share. The topline growth has not been consistent, and even in the last quarter, the revenues declined significantly. This may be partly due to the conscious effort of the management to concentrate on higher margin products, but it is important now for the management to focus on this aspect as well. Sales have to be maintained above a critical level, specially in view of the low margins. Competitors like Medifast (MED) have been doing well, while Weight Watchers (WTW) did not report good numbers for Q2. Competition is fragmented and diverse. There is competition from vitamins / mineral supplements companies where new products are being launched all the time. Chromadex Corporation (CDXC) has recently launched a weight loss /diabetes management vitamin derivative. An established player like Nutrisystem can be expected to do well, though things may not be that easy. Meanwhile, the stock price has appreciated strongly over the last 4-5 months. It is 80% above the 52 week low made in April. After such a fast rise, it is good to remain a bit cautious.
The correction seems to be getting deeper, and several analysts have now openly expressed negative opinion about the stock. The losses continued even in the last quarter, though there was a decline on a yoy basis. Sequentially, the losses increased. The revenue growth continued both on a yoy basis and sequentially. In Q2'13, the revenue was $59.22 million compared to $36.5 million in Q2'12 (a 62% rise). The net loss in Q2'13 was $14.33 million compared to net loss of $23.39 million in Q2'12. The rally in the stock over the past one year has made it extra vulnerable to shocks like negative surprises in earnings. Further, even positive surprises may take time to have a sustained effect. However, worse stocks have risen and better stocks have crashed in the market, so anything is possible. There can surely be some rallies. However, going by probabilities and analyst opinion based on existing fundamentals, it seems that it will take a lot of good news to improve the sentiments. The shorts data (for July 31) was very high at 35%, and there has been a continuous increase since May 31. So all pointers are negative. Some analysts have even questioned the viability of the business model of Angie because of the recent growth in social media. Products and services are reviewed free. Direct / indirect competition from players like Yelp (YELP), Groupon (GRPN), Facebook (FB) adds to the degree of difficulty. Native advertising and social media sponsorship is also getting increasingly popular. IZEA (IZEA), a company in this space, recently posted record numbers. ANGI has to do something special, and pretty quickly to change the negativity. Otherwise, the momentum on the downside may increase further. Volumes will be an important metric to watch. It is difficult to keep the faith anymore. It is becoming relatively more speculative.
The positive surprise in the recent earnings has led to a lot of upgrades for the stock. The power of the Yelp brand and the potential of the mobile segment had its effect. JP Morgan increased the price target to $52 and Credit Suisse raised the price target to $56. Jefferies analyst has a new PT of $50 for the stock. The stock has appreciated significantly over the last few weeks, and the sentiments have improved even further. The company guidance for Q3'13 is for net revenue in the range of $58 million to $59 million and adjusted EBITDA in the range of $7.5 to $8.0 million. For the full fiscal, the guidance was raised to $222 million to $224 million for revenues, and adjusted EBITDA in the range of $27 million to $28 million. In H1'13, the revenues were $101.2 million, up 68% compared to $60 million in H1'12. The net loss for H1'13 declined sharply to $5.7 million or 9 cents per share, compared to a net loss of $11.8 million or 26 cents per share in H1'12. Importantly, the adjusted EBITDA for H1'13 was approximately $11 million compared to $630K in H1'12. So the bottom-line is showing improvement, and the revenue growth continues to be robust. This has changed the outlook for the stock totally. The liquidity position remained good and it has zero debt. Competition from players like Google (GOOG) and Yahoo (YHOO) is strong, and there are smaller players in same or other segments like IZEA (IZEA) (native advertising, social media sponsorship) which are likely to provide direct / indirect competition. So the company is surely getting there, but is not there yet. The stock has moved significantly in anticipation, and the fundamentals will need to keep catching up. The potential is huge, but after such a huge rise, it is good to remain a bit cautious.
The performance of the company in the last two quarters has dented the sentiments significantly. It is important to remember that the company has performed extremely well over the last few years. Also, the stock has done great despite the huge correction over the last few months. The stock is still around 40% up on 52 week basis, though it has corrected by more than 30% from the 52 week high made in May. The stock has recovered a bit from the recent sell off and seems to be stable. However, the recovery over the past few days has not been backed by volumes. The Q2'13 earnings miss led to downgrades and cut in price-targets by many analysts. However, some analysts consider the sharp decline as a buying opportunity for the long term. An article on seekingalpha expressed hope of better performance by the company in the long term. The author mentioned that the acquisitions by the company over the last few years have helped it adapt to the changes in the business environment. Especially for online advertising, he mentioned acquisitions by the company in emerging segments of online advertising like Dotomi (behavioral targeting) and Greystripe (mobile advertising). As per the author, the valuations are better compared to the ad-tech peers like Facebook (FB), Google (GOOG) and Yahoo (YHOO). Valueclick is likely to face more competition from existing and emerging players. There are some segments, specially in online advertising which are expected to grow faster. Social media sponsorship & native ads is a fast growing segment with big and small players like IZEA (IZEA) expected to do well. For Valueclick, the guidance for the third quarter is for revenue between $164-$168 million, adjusted EBITDA of $53-$55 million and GAAP net income per diluted common share in the range of $0.30-$0.31. It desperately needs to beat the guidance a couple of times to change the sentiments.
The power of celebrity tweets has become a topic of discussion. The Icahn tweets about Apple (AAPL) led to billions of dollars in increase in market cap for the company. An article recently mentioned the rate list of celebrity tweets provided by IZEA, and also cited another instance where celebrity influence has helped the advertiser. A seekngalpha article describes what is called as "banner blindness" which refers to the tendency of internet users to ignore, or even actively avoid, the traditional banner ad on a web page. Increasing awareness about this concept is making the advertisers consider native ads and other options which are likely to get more attention of the users. The article mentions results of the studies conducted by Jacob Nielson in 1997 & 2007. The study noted four exceptions to users' banner blindness, namely, search engine results, classified ads, ads embedded in a video stream and native ads. Despite this, the banner ads remain popular because the industry still shows growth, but the native ad spend is expected to grow faster over time. The growth rate of native ad spend will overtake the growth rate in banner ad spend by 2016. Paid social media advertising is expected to reach $3.8 billion in 2016 compared $1.5 billion now. During Q2'13, Facebook reported that 41% of its total ad revenue came from native news feed ads on mobile devices, up from 3% during Q2'12. Twitter is expected to generate $583M this year from Sponsored Tweets. This is expected to rise exponentially to $950M by the end of 2014. Increased use of mobile devices is one of the factors influencing the fast growth. Lower cost per click (CPC) for mobile devices is also a factor. The article mentions that recent results of IZEA showed a hint of the potential. If the company gets it right, it may be one of the major beneficiaries of the future growth.