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The stock has done much better than many of its peers over the last few months. It is almost double its recent low made in June, and has fallen only 5-6% on a 52 week basis. In Q2'13, the company posted a net loss of $9.6 million ($0.21 per share) compared to a loss of $2.3 million ($0.05 per share) for the same period last year. Even sequentially, the net loss increased. The net loss comprised of the non-cash charge of $2.2 million related to the amortization of the flow-through share premium received on the November 2012 financing, and the non-cash charge of $6.2 million mainly related to the set-up of deferred taxes on the value of the Company's mineral properties. The investment in mineral interests declined on a yoy basis from $12.2 million to $8.2 million mainly at KSM and Courageous Lake. The net working capital also declined. On June 30, 2013, net working capital was $29.2 million compared to $49.6 million on December 31, 2012. A recent article on seekingalpha has expressed doubts about the viability of the company's KSM project at current price levels of gold. The author stated that the prices need to cross $1400 and the capital funding required to fund the project would be very high. Another article on seekingalpha had mentioned that cost of production was a key metric in the gold mining business, especially in the current environment. The industry average was around $1200 per ounce, with exceptions like Pershing Gold (PGLC), another development stage company, expected to have all-in costs at around $800 per ounce. The potential of the KSM property is immense, and the recent results indicated prospects of finding another high-grade core zone. In any case, it is one of the largest undeveloped copper-gold-silver deposits in the world with expected deposits in excess of 38 million ounces of gold and 10 billion pounds of copper in the reserve category. However, after such a huge rise in the stock, it is good to be a bit cautious.
Barrick has done great over the last few weeks. It is nearly 45% above the 52 week low made in June, and may do much more if the uptrend in gold continues. It needs to move beyond $22 to go to the next orbit. This performance is better than many peers who are around 25-30% up from the lows. Gold is now up nearly 15%, and that has led to the sharp moves. People are getting more positive on companies like Barrick, and analyst opinion on the sector is also better than what it was a few weeks ago. Big investors like Marc Faber have also reiterated their preference for the gold mining stocks. The big write-down taken by Barrick recently has made the financials look bad, but the “bath” will help it in the long run. Importantly, the 2013 production guidance was maintained and the cost guidance for both gold and copper was lowered. Further, budgeted capital and costs were lower by $2 billion in H1 2013. The dividend has also been lowered. The all-in costs came in at $1276 in Q2'13 compared to $1549 in Q2'12. In H1'13 the costs were $1323 compared to $1387 in H1'12. Barrick needs to show more improvement on this front, especially in view of the prevalent prices. Sale of the three higher cost mines in Australia will help in reducing the costs. A development stage company Pershing Gold (PGLC) is expected to have much lower costs at $800 when it starts production. For Barrick, if the declining trend in cost continues, and gold remains stable to positive, then the next earnings will look much better. The debt on books is high, and that is always an area of concern. Considering the overall picture, if gold remains firm, it will be a stockpicker's market, and Barrick may be on the list of many.
Newmont has been upgraded by Zacks to neutral with a price target of $34. In July, several analysts had downgraded the stock. This is an indication of the slight change in sentiments over the past few weeks. A report from Sterne Agee also stated that the letup in selling of gold and silver should be good for shares in precious metals miners. Newmont has appreciated around 18% from the low made earlier this month after the earnings. Other stocks in the gold sector have done much better with nearly 30% appreciation from the lows made in June. Gold is now up 14% from the low made in June, and has crossed some important psychological hurdles on the way. If it can hold on to these gains for a couple of months, then the sentiments will change decisively. The real test will come if there is any negative news from anywhere. If it is able to recover from any consequent correction, then that may signal underlying confidence. Newmont has taken a $2.2 billion write down in Q2'13. The all-in costs (excluding stockpile write downs) were around $1,136 per ounce. This is below the industry average of $1200, but compares poorly with some other companies which have much lower costs. Even Pershing Gold, a development stage company, is expected to have much lower cost of around $800 per ounce when it starts production. So the margins are likely to remain thin unless the company is able to reduce costs substantially. The capital costs are expected to come down significantly due to the company's efforts. So we may expect some positive developments on this. If gold remains stable to positive, the next few quarters may look better, especially in light of the write down taken by the company. However, relatively high leverage (debt at $6.7 billion) is an area of concern.
The last few days have been a little weak, but gold mining stocks have performed very well over the last few weeks. The volatility has been high, but gold has been able to move over crucial levels. It is important for these levels to hold if tested. Reaction to negative news will be a test. If it can survive for a few more weeks, then the sentiments will improve decisively. However, the up move has been very fast, and corrections may also be sharp. So it will be good to watch the movements carefully. Randgold has done great by moving nearly 30% from the June lows. It has corrected 4-5% from $80, which has been a strong hurdle for the stock anyway. That can be an important barrier to cross. The recent results were not too great, but the cash costs declined sequentially, and the company managed to remain in the green. The debt is very low and the company strengthened its cash liquidity through $200 million revolving credit facility. Leverage and cost of production are the key metrics to watch in case one wants to invest in gold mining stocks. Randgold has the all-in costs at around $1000 per ounce, and seems to be okay on this front. The average for the industry is $1200, with a few like Pershing Gold (PGLC) expected to have much lower costs ($800 per ounce). So Randgold seems to be comfortably placed on costs and liquidity. However, its exposure to different political environments, especially in Africa, makes the risk a bit higher. The past performance has not been too bad, and the company has been able to maintain professional relations in these environments. If the gold sector rebounds, then it will surely be a stock picker's market, and comparative analysis of the companies will also be important.
The company reported its numbers for Q2'13. The sales increased slightly to $2.7 million from $2.67 million, but the net loss declined sharply from nearly $4 million to less than $1 million. For the six month period ending Jun 29 2013, the sales increased to $5.041 million from $4.455 million in the first half of 2012 (13% increase). The company reported a net profit of $479K compared to a net loss of $8.4 million in H1'12. This was partly due to the $2.9 million received on sale of BluScience to NeutriSci, but even if this is excluded, the loss reduced substantially. The gross profit in the first half was $1.633 million compared to $160K in the first half of 2012. As per the management, the company will be able to support operations with its current cash and cash from operations through December, 2013. In addition, on July 12, 2013, the Company received a partial payment of $200K from NeutriSci from the sale of BluScience consumer product line and expects to receive additional $883K from NeutriSci prior to December, 2013. The company has high hopes from its vitamin derivative Nicotinamide Riboside. HPN recently launched its product containing NR to support neuroprotection in contact sports. The management expects that more products containing NR would be launched by the end of the year. Chromadex announced a three year marketing deal with Thorne Research Inc. for NR. The deal is worth at least $3.5 million and grants marketing rights to Thorne for NR for use in nutritional supplements exclusively for the direct to healthcare-practitioner channel in US & Canada. Chromadex will receive a royalty on sales from Thorne. The Company recently licensed from Green Molecular S.L. exclusive worldwide patent rights related to the use of pterostilbene for the prevention or treatment of skin diseases, damages, or injuries, as well as the combined use with quercetin for the production of melanoma skin cancer treatment medicine.
The stock has been a bit volatile after the earnings. The 6% correction from the top has made the valuations a little better, and some investors may like to buy the stock on dips. The P/E on ttm basis is now 21, and the forward P/E (fye. 31 August 2014) is 13.80. The price to sales is 0.65. Some of the peers may be doing better on these metrics, and the margins are also slightly lower. However, the company has been a consistent performer as far as growth in the top and the bottom-line is concerned. The recent partnership with Alliance Boots is also expected to help the company increase revenues and net income significantly over the next few years. An article on seekingalpha has predicted that the stock can double in the next three years due to the positive effect of the investment. As per the author, the combined revenue of Walgreen & Alliance boots may exceed $130 billion in 2016, and the operating income may be around $9 billion. While the prediction and these figures may be argued, it is quite probable that at least the existing pace of growth may be maintained, and the investors may be rewarded with decent capital appreciation and good dividends over the next few years. The prescription drugs sales is expected to grow due to increase in the size of the market (due to aging population), though some expect the positive effect of the generic drug sales on the margins to reduce over time. The OTC Drugs & General Merchandise (37% of revenues) can do better with high growth products. Chromadex Corporation's (CDXC) has recently introduced an innovative new vitamin derivative nicotinamide riboside which has high potential for growth. Walgreen can look at some other products which are more in line with its own product line focus. Competition from the other two giants CVS Caremark (CVS) & Rite Aid(RAD) will also remain formidable.
The company has hopes from its upcoming launch of ageLOC TR90. It had raised its Q3 guidance to between $790 and $810 million, and earnings per share is likely to be $1.35 to $1.40 based on the expected sales from the new product. For the full fiscal 2013, the revenue forecast was increased by $90 million to $3 billion, and the earnings per share is expected to be $5.05 to $5.15. The stock has done great for the investors, especially over the last few months. It is up more than 130% on a ytd basis, and seems to be good for more. Of course, there may be corrections, especially if the overall market correction runs deeper. More will depend on the fundamental performance of the company, and it needs to focus on the geographical markets where it is not growing that fast. It faces strong competition from the direct selling market players like Herbalife (HLF), Mary Kay, Oriflame, Avon (AVP) and Amway. A smaller company Chromadex Corporation (CDXC) has developed two proprietary ingredients pterostilbene and nicotinamide riboside which are useful for skin care and anti-aging. Nu Skin will need to launch new innovative products from time to time to maintain the growth in sales. Analysts are still upbeat on the stock and JPMorgan Cazenove raised the PT from $82.50 to $97. Deutsche Bank raised their PT from $80 to $100. These targets indicate significant upside potential from the current levels. The average price target is around $88. The valuations are reasonable, as the stock is trading at 22 times ttm earnings and 15 times forward earnings. The PEG ratio of 0.72 implies that there good expectations of growth in the market. The good work needs to be continued because, after such a huge rise, slippages will not be taken kindly.
Nutraceutical has rewarded the investors with good returns over the last few months. It is up 48% over the last one year, and it has appreciated by 32% in 2013. The last quarter saw modest growth of 2% in the revenues, and the net income increased by nearly 15%. Sequentially, there were declines in both revenues and net income. The margins also declined sequentially. Over the longer term, the revenue growth has been good but the bottom-line growth has not been very consistent. The operating profit margin (ttm) is 13.5% while the net profit margin (ttm) is 8.22%. Despite the appreciation in the stock price, the valuations remain reasonable. The P/E ratio is below 13, and the price to sales is 1.04. The price to book is also 1.6 and EV/EBITDA is below 7. The debt is at manageable levels, and the cash on books is around $5.35 million. Growth in revenues is not easy as the vitamins / supplements market is extremely competitive. New products are launched by the existing competitors, and the barriers to entry for new companies are not high. The bigger competitors include Country Life, Enzymatic Therapy, Whole Foods Market (WFM) and Vitamin Shoppe (VSI). Even smaller research based companies like Chromadex Corporation (CDXC) develop innovative products to meet customer demands. Chromadex has recently launched some proprietary natural ingredients which are useful in weight management, skin care etc. Nutraceutical has a strong position in the market, and needs to introduce new products from time to time to increase the pace of growth. There is also a need to improve the margins, though it is doing better than many other players in the industry. Further appreciation in the stock will require marked improvement in the top and the bottom-line. Negative surprises and slippages may lead to a correction. Of course, the overall market sentiments will have an impact.
Analysts at Goldman Sachs upgraded Pandora to Buy from neutral with a price target of $27. The analysts are encouraged by three quarters of accelerating mobile ad RPM and subscription revenue growth. They believe that the “competition concerns are at least adequately understood.” Their analysis suggests upside to consensus estimates as local advertisers are likely to become increasingly comfortable online. They also stated that "Pandora’s sales investments show leverage, and integration into radio ad buying platforms drive long-term growth." They believe the risk/reward in owning P is favorable. Coming after upgrades from JPMorgan Chase (PT $23), the GS comment adds to the positivity. GS price target suggest that there is still room for more appreciation (more than 25%) for the stock. It is trading at all time highs, and will get more direction from the upcoming earnings. After such a huge run up, it is important that the numbers are good. The company needs to deliver positive surprises otherwise there may be some correction. Going by the performance of Q1'14, the company has to do much better to be able to meet the revenue guidance of $615-$635 million for FY 2014. The non-GAAP EPS for FY2014 is expected to be between ($0.02) and $0.08. Contrary to what Goldman Sachs analysts believe, a recent article on seekingalpha expressed skepticism about the growth prospects of Pandora. It stated that given the increasing competition in the US mobile advertising market, the company may not be able to maintain its market share and the losses may increase. The advertising market is highly competitive, and several other concepts compete for the attention of the advertisers. IZEA (IZEA), a company in the social media sponsorship space, recently reported record revenues for the second quarter. Direct competition from Apple (AAPL) and Google (GOOG) will also need to be negotiated. However, the brand strength & popularity of Pandora cannot be underestimated. The earnings will give some direction about the immediate future.
Better than expected results did not do much for the stock. It has corrected from the 52 week high made close to the earnings, and is now looking relatively weak. It needs to rebound quickly to regain momentum. Despite the correction, the stock is still up by more than 80% from the 52 week low, and has appreciated 50% in 2013. The EPS for Q2 came in at $0.13 which was better than the consensus estimate of $0.12. Even the revenues came in better than estimates. The diluted earnings for Q2'13 compared well with the diluted loss per share $1.66 in Q2'12. However, in Q2'12, the company had taken a $157 million impairment hit related to goodwill of its Shoppers business. The stock has remained volatile over the longer term on the back of declining revenues and erratic performance as far as the bottom-line is concerned. The good part is that it has reduced its debt over the years from $270 million in 2009 to $110 million in 2012. The interest payments have reduced significantly, reducing the pressure on net margins. Reaction to the earnings indicates that a lot more work may be required to take the stock higher. The recent appreciation in the stock has factored a lot of the positives, and some major positive surprises will be required for it to cross the recent highs. However, future growth is not easy as the company is likely to face more competition from companies operating in different segments of the advertising industry. Online advertising, especially emerging concepts like social media sponsorship are likely to provide competition. IZEA (IZEA), a company in social media sponsorship / native advertising industry reported record Q2'13 results a few days ago. HHS has to be more dynamic, and adapt to the changing marketplace to maintain its competitive advantage.
Groupon has corrected from the highs made after the earnings, but the performance over the last few months remains very good. The earnings were better than estimates, and the stock shot up smartly. Announcement of the $300 million share buyback also helped improve sentiments for the stock. There was revenue growth of 7% on yoy basis, and there was a marginal increase sequentially. However, the net loss increased from $3.99 million in Q1'13 to $7.57 million in Q2'13. Importantly, the company continued to gain traction on mobile, and around 50% of North American transactions were completed on mobile devices, compared to about 30% in June 2012. More than 50 million people have now downloaded Groupon mobile apps worldwide, with more than 7.5 million people downloading them in the Q2'13 alone. Segment-wise, 45% growth in North America was significantly offset by declines of 24% in EMEA and 26% in Rest of World. Thus, the international revenues fell dramatically on a yoy basis, and Europe remains an area of concern. That could be one problem for Groupon to tackle. There was some sequential increase in operating income in Q2'13. The cash was around $1.18 billion on June 30, and it had no debt on books. On a half-yearly basis, the revenues have increased from $1.12 billion to around $1.21 billion, and the company has an operating income of $48.5 million compared to $86.1 million in the first half of 2012. Other metrics, like active users, also showed improvement. The guidance for operating income for 2013 was maintained at $100 million. Revenue growth will not be easy due to increased competition. Other concepts are gaining popularity. IZEA (IZEA), a company in social media sponsorship, reported record Q2 numbers recently, with phenomenal growth in revenues. For Groupon, a lot more work may be required to achieve profitability on a net basis, but it may be getting there slowly.
Despite improvement in fundamentals, and better than expected earnings for Q2'13, the stock has remained extremely weak over the past few days. It had shown a spike after the earnings, but has corrected significantly after that. It needs to bounce back quickly, as a cut below $12 will add to the weakness. In Q2'13, the EPS figure was better than analyst estimates. Company was able to do better than its revenue guidance, and the adjusted EBITDA came in at $7 million, above the guidance of $5-$6 million. The guidance for Q3'13 is for revenue in the range of $130.5 million to $132.5 million, and adjusted EBITDA in the range of $6 million to $7 million. For the full fiscal 2013, revenues is likely to be in the range of $515 million to $520 million, and adjusted EBITDA in the range of $29.5 million to $31.5 million. The revenues have been growing over the last few quarters, though the company is still not net positive on a ttm basis. In the first quarter of 2013, revenues had increased by 17% and the net loss had reduced significantly compared to Q1'12. The net loss had increased sequentially. In Q2'13, there was sequential growth in revenues, and the net loss also declined from $640K to $140K. On a half yearly basis, the revenues increased from $216 million in H1'12 to $249 million in H1'13. The net loss increased from $674K to $776K. It will be difficult for the topline to grow faster as the competition is pretty fierce. Social media sponsorship (SMS) / native advertising is also gaining popularity. IZEA (IZEA), a company in the SMS space, reported record Q2 numbers a few days ago. IZEA is also launching its Native Ad Exchange shortly. However, ReachLocal is close to break even, and it requires a few quarters of good performance to cross that important line.
The results for the second quarter have been announced. The revenues increased by 43% to $1.715 million, which an all-time high for IZEA. The company achieved record net bookings of $1.8 million for the quarter, up 56%. The company booked $3.45 million in sales during the first half of 2013, or $6.9 million on an annualized run-rate basis. Importantly, The operating expenses decreased 35.4% primarily due to decreased professional, payroll and marketing expenses. The EBITDA was $(321,343) compared to $(1,255,037) in Q2'12, an improvement of 74%. Net loss also declined significantly from $1.839 million to $893,470. The loss per share in Q2'13 was 12 cents compared to $1.44 in Q2'12, which is a significant decline. On a half-yearly basis, the loss declined significantly from $2.46 per share in the first half of 2012 to 25 cents per share for the first six months of 2013. As per the CEO, "In late 2012 we began a process of refocusing operations and streamlining our sales and marketing efforts. As a result, we have not only delivered record revenue and record bookings, but made significant headway towards profitability. While we are not yet at that point, I am confident in our ability to efficiently scale and cross that threshold in the future." So the company seems to be on track to achieving profitability, and the results of the next few quarters will indicate the progress. The upcoming launch of Native Ad Exchange will only add to the revenues over the next few years. Native Ad Exchange is the first platform of its type, and will act as a marketplace through which advertisers and media publishers can come together. There have been several high profile additions to the advisory board of the company recently. The expectations about the long term future are now higher.
Investors can only be happy with the stock's performance over the last 8 months. It has nearly tripled from the 52 week low made in December 2012. Even on a 52 week basis, it has appreciated by 77%. Even over the longer term, the stock has done well. The fundamentals have remained abreast with the stock price. Last earnings saw the company beating analyst estimates by a huge margin, and revenue and net income increased by 18% and 45% respectively. The earnings guidance for the full year was upped to $5.3-$5.45 per share, and even the revenue estimate was enhanced to $700-$720 million. Consequently the stock got a boost, and momentum increased. Because of the improvement in fundamentals, the valuations remain reasonable even after such a huge rise. The trailing P/E is around 14.7, and the forward P/E is around 13.50. This indicates modest expectations of growth in earnings over the next few quarters. The PEG ratio is 0.82 which indicates expectations of good growth in earnings over the longer term. The price to sales is also not too high at 1.63. The operating margins and the net margins are around 17% and 11% respectively on a ttm basis. The good part is that the company has no debt on books, and it had around $96 million cash on June 29. The supplements and weight management market will continue to grow at a reasonable pace. New innovative products are launched from time to time based on customer needs. Chromadex Corporation (CDXC) had recently launched a vitamin derivative nicotinamide riboside for weight and diabetes management. USNA is known for the safety and quality of its products, and manufactures most of its products in-house. It has received numerous awards for that. USNA has to add new products from time to time to improve the margins and bolster the growth rate. After such a huge rise, it is important that the company meets and exceeds the guidance. However, the shorts data for July 31 is pretty unbelievable.
Kinross has moved about 26% from the 52 week low, and is now looking better. The earnings have been digested, and the company has taken huge write-downs already. Gold prices have appreciated significantly, and a few more days of positive movement will take it to the next level. The bouts of volatility indicate that the nervousness is still around. However, there are more positive signs now as some companies have invested in development stage assets. Pershing Gold (PGLC) was able to obtain $9 million funding (at market price of the stock) for starting production in 2014. The production cost for Pershing is likely to be around $700-$800 per ounce. If the outlook improves further, there will be more stock specific action, and companies with lower cost and better leverage position will be preferred. An article on investing.com (Drilling for $1300/oz Gold: A look at Nevada's Investment Conundrum), highlights the importance of reducing costs in the current environment. Kinross has already embarked on cost reduction, and has identified $180 million savings in capex and opex in the second half of 2013. The capital expenditure in 2014 is likely to be reduced. For 2013, the forecast is $1.45 billion compared to $1.6 billion earlier. The exploration expenditure forecast is also reduced from $160 million to $130 million. Attributable all-in sustaining cost per gold ounce sold was $1,072 in Q2'13, up from $970 in Q2'12. The guidance for 2013 is $1100-1200. Considering this, Kinross is lower on cost compared to some peers, but needs to do more to insulate itself from adverse movement in gold prices. Kinross expects to produce approximately 2.4-2.6 million gold equivalent ounces for the year. The next few quarters will indicate whether Kinross is able to improve the margins. The times are still uncertain, and hence it will be good to remain cautious.
The reaction to the earnings will be seen over the next few days. The company achieved record attributable silver equivalent production of 8.6 million ounces (up 28%). Silver equivalent sales increased by 4% to 7.2 million ounces. The revenues declined by 17% to $166.9 million and the net earnings fell by 50% to $71.1 million. The operating cash flows also declined by 28% to $125.3 million. Importantly, the cash operating margin also declined from $25.01 per silver equivalent ounce in Q2 2012 to $18.28. The debt on books has increased over the last few quarters and the cash on June 30 was $36.3 million compared to $778.2 million on December 31, 2012 and $75 million on March 31, 2013. So, on the face of it, the performance is not too great. Meanwhile, the rise in silver and gold prices has led to a decent rally in mining / streaming company stocks over the last few sessions. Silver Wheaton has appreciated by more than 40% from the 52 week low made in June. Many analysts have mentioned cost of production & leverage as major factors in selecting stocks. An article on investing.com (Drilling for $1300/oz Gold: A look at Nevada's Investment Conundrum), highlights that the importance of reducing cost of production. Even Moody's had expressed similar sentiments about mining companies, wanting them to reduce costs. The outlook for the sector is improving, though things can change suddenly. There are positive signs with companies putting money in development stage companies. Pershing Gold (PGLC) was able to obtain $9 million funding (at market price of the stock) for starting production in 2014. The production cost for Pershing is likely to be around $700-$800 per ounce. For Silver Wheaton, reaction to the earnings will be the crucial factor in determining the immediate future. Hopefully, silver will continue to strengthen so that the mood improves.
The recent earnings led to a sharp decline in the stock. It has erased whatever gains were made in July, and is now trading at half its book value. The revenues increased substantially both on yoy and sequential basis, but the announcement of deferral of Hycroft Mill Construction and reduction in workforce had a negative impact on the sentiments. The net profits also declined significantly, though the performance was better compared to some peers. The stock has been a marked underperformer, and is now down 85% on a 52 week basis. In fact, many stocks have gained 20-25% over the last few weeks on back of the upward movement in gold prices. For ANV, the costs of production also increased, and the liquidity situation became a bit tighter. A recent SA article had mentioned that though the stock price had factored in a lot of negatives, liquidity remained a matter of concern. An article on investing.com (Drilling for $1300/oz Gold A look at Nevada's Investment Conundrum), mentions several companies in Nevada including ANV. It highlights that the importance of reducing cost of production, and favors some low cost producers / development stage companies in the current environment. Elsewhere in the sector, there have been some positive signs like acquisition of a development stage company by Alamos Gold (AGI). Even a development stage company Pershing Gold (PGLC) was able to obtain $9 million funding (at market price of the stock) for starting production in 2014. The production cost for Pershing is likely to be around $800 per ounce. For ANV, the next quarter will be important. If gold prices support, things can take a positive turn provided the costs remain under control. Scotiabank had recently downgraded the stock and they now have a PT of $3.50 compared with $12.00 earlier. So the sentiments may take time to improve.
There have been several articles recently emphasizing that the low cost producers are the favored bets in the current scenario. There is one article on investing.com which focuses on companies in the Nevada region ("Drilling for $1300/oz Gold A look at Nevada's Investment Conundrum"). It mentions Coeur and some other companies of the region and is interesting to read. It mentions how the cost guidance has been raised by Coeur for silver production over the last few quarters. It also mentions that it is practically difficult to make money for gold companies below $1200. In the recent earnings report, Coeur had stated that it achieved $19 million of cash operating cost savings in the first half, and will do about $8-$9 million more during the remainder of the year. The exploration and the capital expenditure has also been reduced significantly. Moody's had recently stated that the miners should reduce capital and operating costs to avoid downgrades. Coeur seems to be on track as far as cost reduction is concerned. The overall sentiments for the sector are better, and gold / silver are now close to crossing important hurdles. One can see some acquisitions of development stage companies by bigger players to take advantage of the cheap valuations. Confidence of the management is increasing, and Pershing Gold (PGLC) recently obtained $9 million funding in a private placement which may help it start production in 2014. Importantly, the funding was at market value, and at relatively less dilution. So there are signs all around, but the volatility is likely to continue and no one be too sure. Coeur has maintained its guidance for 2013, and the stock is up 20% after the earnings. It is now above the July high, and if gold / silver can go 3-4% higher, then some of these stocks can go to the next orbit.
The $9.6 million funding (including the reduction in debt) has surely increased the prospects of the company to start production. In the previous 10Q, the company had stated that it required around $10.1 million to provide for the balance three quarters of the fiscal 2013. Importantly, about half of those expenses pertained to start of production, and the rest were for expansion / exploration activities. As per the filing, approximately $2.4 million expenditure was estimated for recommissioning the Relief Canyon gold processing facility, $1.2 million on land holding and permitting costs for the Relief Canyon Properties, $2.5 million on general and administrative expenses, $2.0 million on exploration and pre-development work at the Relief Canyon mine property, focused on further expansion of the deposit and a PEA, and $2.0 million on exploration at the Relief Canyon expansion properties. So if one includes the $1.5 million received from sale of Valor Gold shares, the total funding should suffice for the full fiscal 2013. Importantly, the activities will take it closer to production, leading to more investor interest. Insiders like Barry Honig and Alfers have participated in the funding, and they may be expected to do more if required. Confidence of the insiders is apparent, and the current funding will definitely make it a more viable investing option for other investors. The latest funding is at market price of the stock, represents 10% of its market cap and 27% of the float. The price of gold has also improved, and other gold producers have put in money in development stage assets recently to take advantage of the cheap valuations. Alamos Gold (AGI) made such an acquisition recently. If gold moves beyond the recent highs convincingly, the outlook will improve. Pershing Gold's expected cost of production of around $800 (all-in costs) is another positive factor in its favor.
Chromadex has been in the news recently for deals related to its proprietary ingredients. After a three year marketing deal with Thorne Research for NR, it recently announced that it had licensed exclusive worldwide patent rights related to pharmaceutical and cosmetic preparations of pterostilbene for topical application for prevention and/or treatment of skin diseases, damage or injuries, including those relating to aging and exposure to the sun, from Green Molecular, S.L. Now, ChromaDex has eight patents for pterostilbene, out of which two are related to skin care. The company already has tasted success with the ingredient by selling BluScience, a product containing pterostilbene. The effect of that deal was reflected in the last quarter earnings. The NR deal with Thorne is worth at least $3.5 million and grants marketing rights to Thorne for NR for use in nutritional supplements exclusively for the direct to healthcare-practitioner channel in US & Canada. The company will receive a royalty on sales from Thorne. Considering this, it will be interesting to see the financial impact of these deals in the results for the second quarter. Even the BluScience deal involved terms related receipt of royalties, and revenue from sale of the ingredient. Use of PurEnergy in MusclePharma products will also help increase awareness about ChromaDex's ingredients. Even HPN had recently launched its product containing NR to support neuroprotection in contact sports. An important test will be how these products perform in the related indications. If there is positive feedback from the users / researchers, e.g. in weight loss etc., then the real momentum may start. This can have cascading positive effects as the company has built a lot of barriers around these ingredients through its patents. Hopefully, the future will bring in more positive news, and good impact of these deals on the financials.
Macro news will determine how things go, but the possibility of $1150-1200 providing support (if tested) is high. On the upside, if gold is able to move beyond the recent highs with conviction, and stay there, then the outlook will become distinctly better. Below $1200, most mines will not be viable, and hence the supply-demand play may lead to adjustments over time. Gold has already spent a lot of time (many quarters) correcting, so there is a possibility of a sustained rebound. All these factors do make a case for some positivity in the near future. Of course, nothing is certain. For Pershing, improved sentiments may translate into investor interest. New players may be interested if they find value in the proposition of the company starting production within a few quarters with their money. Further, the cost of production for Pershing is also expected to be pretty low ($800-900 per ounce). It is a big question of being able to find funds quickly. For that it is important that the sentiments improve. A rebound in gold prices can have a much more positive effect in the mining / development stage companies. So far a 1% rise in gold has led to 3-4% rise in individual stocks. Many legendary investors have become more positive on Gold, and several others expect stock specific action when the sentiments improve. Some would prefer producers and some would like the higher risk development stage bets. There have been some acquisitions / stakes in other development stage assets. e.g. Alamos Gold (AGI) acquired Esperanza resources recently. Over the last few months, there have been many others. The circumstances / valuations may be different, but one can see some positive signs. So the next week will be interesting to see if gold has the guts, to kill a few hurdles, for good.
The earnings were okay if the overall environment is considered. The revenues fell by 20%, and the company reported a net loss after quite some time. The all-in sustaining costs fell sequentially. As per the management, that is a result of the recent cost rationalization efforts. The valuations are not that comfortable as the P/Es of gold stocks are getting higher. For Yamana, the forward P/E is 16.6, and the price to book is 0.94. The key factor is the price of gold, and that has been quite volatile recently. Still, crucial levels have held, and the rebound has been good, so far. Yamana had done well to rise 32% from the June lows, but it has lost a bit of the ground after that. If gold can work a little harder and cross the recent highs convincingly, then the shorts will surely get a bit edgy. The outlook will improve. That is not too far away, and a 3-4% push is required. The extreme level of negativity is missing, but conviction is also not totally there. It can be called balanced or uncertain. One cannot ignore that gold has corrected quite a bit over past many months, and it deserves a sustained rebound, at least for some time. Of course, the macro, or its version, will determine how things will progress. The price of gold is below the cost of production in some mines, and going below $1200 will lead to reduction in supply. A seekingalpha article had mentioned the average cost of production for gold at around $1211 per ounce, with few companies like Pershing Gold (PGLC) expected to have much lower costs ($800-900). In the event of a bounce, the low cost producers will be preferred. Yamana would surely like to tighten its belt to be on that list of better bets.
Alamos has been one of the better performing stocks in the sector recently. It is much more resilient, and responds better to the positive days in the volatile environment. If gold can move another 3-4%, and sustain those levels, then the stock will be able to cross the recent high of around ~$15.50. That will improve the outlook for the stock significantly. The recent earnings showed declines in both revenues and net income, but still it managed to remained net positive. The all-in sustaining costs need to be controlled as that will be the key to good financial performance if the gold prices rebound. Alamos was upgraded by Scotiabank from outperform to a focus stock, and the target is C$19.00. That indicates a lot of upside potential. RBC Capital has a PT of C$16.00, and Credit Suisse also raised the PT from C$13.00 to C$14.00. The consensus rating is buy and the target price is C$17.42. A seekingalpha article had mentioned that the average cost of production for gold is around $1211 per ounce, with some companies like Pershing Gold (PGLC), a development stage company, expected to have costs as low as $800-900 per ounce. For Alamos, even the all-in costs are expected to be much lower as per the management guidance. However, there was increase in the all-in costs in the second quarter, and this aspect needs to be monitored. In any case, compared to peers it is still a low cost producer, and better leveraged. The valuations are getting stretched with a P/E (TTM) of around 19, and price to book of 2.3. The price to sales is also pretty high. The key remains the price of gold, and next week will be important in determining how things go from here. But Alamos should be a preferred bet if the sentiments improve.
The earnings were on expected lines as no one anticipated anything exceptional. The rise in production costs was a bit of a concern, but the guidance for the full year was maintained. Production guidance for 2013 is at 970,000 to 1,010,000 ounces of gold, and costs may be around $1100 per ounce. That will be an important metric to watch in the coming quarters. If gold rebounds, the low cost producers will be preferred at the time of stock picking. The costs for Agnico remain below the industry average. A seekingalpha article had mentioned that the average cost of production for gold is around $1211 per ounce, with some companies like Pershing Gold (PGLC), a development stage company, expected to have costs at much lower levels ($800-900). So Agnico has to keep the costs under control. The recent movement in gold has indicated that there is a some resilience, and the downward momentum is not that strong. There is still a lot of nervousness, and the probability of a bad scenario cannot be ruled out. However, if one considers that gold has already crashed significantly over the past many months, the probability of a sustained rebound looks higher. Further, the price is very close to the production costs, and hence going below that level will need something remarkably negative. Agnico has bounced by more than 10% from the recent lows. Gold has also bounced by 3%. If gold can rise about 4% from current levels, that may lead to stocks like Agnico crossing recent highs. That will make the outlook much better. Cost control and balanced leverage will be the main factors, and Agnico is not too bad on both fronts. The valuations may be relatively higher compared to peers, and that is another area of concern. Next week will be important.
The last couple of sessions have been pretty good. Goldcorp has been able to rebound sharply on good volumes, and is 10% above the very recent lows. It is getting close to its very recent highs. Even gold has done a good job by bouncing from the recent lows. It needs to cross $1350 to make the outlook more positive. That is just a 3-4% away, and next weeks action could be interesting. Going by the volatility, it is sure that even the shorts are getting a bit nervous. Longs are still edgy, but less so. The extreme outcome theories are slowly being tucked away, and may return only if there is a significant correction. Those with escalation of commitment, cannot be helped in any situation anyway. There may be theories in support of more negativity, but there are also those positive points. Gold has corrected significantly, and so the current rebound could last longer, especially if the recent highs are crossed convincingly. Also, the price of gold is below the cost of production of some mines, and will surely be lower than the average if it falls below $1200. A seekingalpha article had mentioned that the average cost of production for gold is around $1211 per ounce, with some companies like Pershing Gold (PGLC), a development stage company, expected to have costs as low as $800-900 per ounce. So $1200 becomes a support of sorts, and has shown some strength (though may need more testing). Importantly, many companies, including Goldcorp are taking massive write-downs. The "bath" may help their financials look good as soon as gold rebounds strongly. However, the recent earnings showed the all-in sustaining cost of production for Goldcorp at $1279 compared to ~$1050 in 2012. That is surely a problem which needs to be addressed.
D.A. Wallach has joined the strategic board. Apart from music, Wallach is a recognized social media pioneer, and importantly, advises or invests in several start-up technology companies. He has been using IZEA's platforms for a couple of years. He feels that, with the Native Ad Exchange concept, the company is now working towards a scalable approach to helping influencers earn a living from their audiences. IZEA is expected to benefit from the social media experience of Wallach. With the addition of so many experienced and influential members to the board, the company will benefit from the experience. There have been articles highlighting the potential of the social media advertising segment. A recent one on Benzinga mentioned that paid social media advertising was poised to expand, with nearly two-thirds of advertisers saying that they would allocate more money to it from their budgets. The expected earnings for IZEA for 2013 is around $6.7 million which is approximately 2.4 times the current market cap. With the industry growth rate expected to be more than 19% over the next 4 years, IZEA may be well positioned for good growth in the future. The upcoming Native Ad Exchange also has tremendous prospects. Native advertising involves the placement of advertisements on a website or a blog that adopt the style of their host media. Native Ad Exchange is the first platform of its type, and will act as a marketplace through which advertisers and media publishers can come together. The most important thing is that the company is expecting to turn net positive soon. However, it will need to continuously find funds for operation, and near-term financing of the shortfall is currently being met by loans from an independent director. So it needs to grow with the market, and achieve profitability soon. As soon as that happens, the valuations will change dramatically, and the company may attract more investor interest.
Gold has corrected by 3-4% recently, and the stocks have moved accordingly. In fact, the movement in gold mining stocks has been much more exaggerated, and they have erased most of the recent gains. New Gold had moved 30% in one month, and it retraced the move within 10 odd days. However, if there is a sustained bounce from crucial levels ($1285), then the reaction will be equally sharp. If it crosses the recent high (~$1340), then the shorts will get a bit uncomfortable. For New Gold, the earnings showed that the all-in sustaining costs increased from $798 in Q2'12 to $931 per ounce in Q2'13. However, sequentially, the costs declined from $1094 in Q1'13. Moody's had recently stated that gold mining companies need to improve their cost efficiencies by reducing operating cots, deferring capital spending and idling the higher cost mines. In absence of visible improvement on that front, the outlook may become negative. The analysts had also mentioned that if gold persists below $1300, or if it becomes more volatile, then there may be some downgrades. The takeaway from this is that the lower cost producers may be favored in the current environment. For New Gold, the cost are still lower than that for many companies. A seekingalpha article had mentioned that the average cost of production for gold is around $1211 per ounce, with some companies like Pershing Gold (PGLC), a development stage company, expected to have costs as low as $800-900 per ounce. So if New Gold can keep the costs under control, it may be able to take better advantage of the rebound in gold prices. Debt position is also not too comfortable, and it will be good if it can keep that within reasonable limits as well.
The last few months have been great for the stock. The improvement in fundamentals has helped it shrug off the negative news flow. Of course the news about long position by a celebrity investor has helped matters too. It is 170% up from the 52 week low, and has done well over the longer term as well. The valuations are still okay with a forward P/E of less than 12 and price to sales of 1.52. The profit margin is above 11% on a ttm basis. The PEG of 0.88 indicates good expectations of growth in earnings over the next few years. Over the years, the revenues and net income have grown at a good pace. The last earnings were good, and even the guidance was improved. So the long term trend may remain good, but there may be normal corrections in the short term. This is because the stock has already run up quite a bit, and there could be profit booking at higher levels. It is important to note that it is close to $73 levels reached in early 2012, and there could be some pressure before that. Secondly, with such big giants fighting it out inside and outside the trading arena, there could be volatility somewhere down the line. The market is likely to grow, but the competition is likely to remain strong. Companies in different segments of the weight loss / nutrition /skincare market will get more aggressive. There are formidable players like Weight Watchers (WTW) & Medifast (MEDI), and even a small company like Chromadex (CDXC) has introduced an exciting new vitamin derivative for obesity / diabetes management. The shorts data for July 15 indicated extremely high levels (43%), but the price on that day was $52. So it is quite possible that many of those traders may be a bit sad right now. Latest data will be interesting to see.
A recent article on insidermonkey makes an interesting read. It reveals statistics about diabetes which indicate great growth prospects for companies like Novo Nordisk which specialize in the field. The number of people in the world suffering from diabetes is likely to increase by 50% from 366 million in 2011 to 552 million in 2030. Type 2 diabetes represents more than 90% of the cases. Urbanization, changing diets and the rise of sedentary lifestyles have all contributed to the increase. 80% of total diabetes cases are from the not so affluent countries. China, India, and Indonesia are the high potential markets. China has more than 93 million patients now, and the number is going to increase to nearly 130 million in 2030. India is expected to have 101.2 million by that year, and the US nearly 30 million patients. Novo has a good market share in China, while Merck (MRK) is making inroads into the Indian, Brazilian and Chinese market with its diabetes drugs. S&P predicts the diabetes market to be $58 billion by 2018 (65% over 2012's figure of $35 billion). Companies like Sanofi (SNY) and Johnson & Johnson (JNJ) are also getting more aggressive in the market. Considering these statistics, the major players in this sector like Novo Nordisk are going to benefit from the growth story. However, the high potential segment is likely to get more competitive over time. Even smaller players like Chromadex Corporation (CDXC) are actively researching on innovative molecules for diabetes / obesity management. Chromadex has recently launched a vitamin derivative which is useful in diabetes / obesity management. Novo has done well over the years on the back of improvement in fundamentals. There are hopes from Tresiba, and the R&D pipeline looks healthy with several products at the filing or the phase 3 stage.
The company has posted a net profit for the last three quarters in succession. One more quarter of net profit will improve the ttm valuations significantly. Even now, the price to sales of 0.11 and P/E of 13 make the company look undervalued if the future positives are factored. The bottom-line has shown continuous improvement, which indicates that the cost control measures of the company are also proving to be successful. The company has taken steps to restructure its debt. That is expected to lead to annual savings of around $85 million. The stock has moved in tandem with the improvement in fundamentals. It had corrected a bit after the last earnings, but recovered smartly to make a new 52 week high. It is off those levels, and seems to be taking a pause. The immediate future of the stock depends on the ability of the company to maintain the improvement in the bottom-line. Declining sales is a worry, and it is important that the trend changes soon. The drop in sales is related to various factors including a conscious effort to close loss making stores, focus on higher margin generic products etc. The company needs to maintain a minimum amount of sales to cover fixed costs, and hence it is imperative that it takes on new products which can help in bolstering sales & margins. A high potential vitamin derivative, Nicotinamide Riboside, has been launched by Chromadex (CDXC). The vitamin derivative is useful in several indications including obesity and diabetes management. Rite Aid can look for similar products which fit in its 'wellness' theme. The recent data about same-store sales has indicated marginal growth. So it has been a great turnaround story so far, and a few more quarters will make it a preferred bet. It has already rewarded the investors with great returns.
The earnings have been disastrous for the stock. The volumes were nearly 6 million shares on that date, and it is very difficult for the sentiments to change soon. Customers shift to free apps and electronic monitors has led to reduction in the competitive advantage which Weight Watchers had over other players in the industry. Analysts are negative on the stock as Credit Suisse cut the PT from $54 to $45. Now the stock is trading much below that. The outlook given by the management is also not robust. For 2014, the company expects the meetings active base to be even lower than it was at the start of this year. It is an old company, and the market share is still big. The brand value is tremendous, and it is trusted. Perhaps, it has not moved with the times as much as it should have. The concept of meetings / groups is unique. In fact, meetings / groups are what the social networking world is all about now. Maybe the real meetings are not as popular anymore. Some weight management sites offer the weight management plans and also have the community aspect, though virtually. So it is surely possible for Weight Watchers to get back on the growth path by changing its strategy without losing its uniqueness. The market will grow and new players will keep entering. It has to contend with competition from companies like Medifast (MED), Herbalife (HLF) etc. from other segments of the market like medicines, supplements, diets etc. Chromadex (CDXC) has recently launched a vitamin derivative for weight and diabetes management. Weight watchers has other problems which need to be addressed soon. The debt and the cash position is also not good at all. However, none of the problems are insurmountable, and the new leadership can lead to way. However, it will take a lot of time.
Earnings are going to be declared next week. In an update, the company had announced preliminary selected unaudited financial results for the Q2'13. Revenues are estimated to be in the range of $49-$50 million instead of the previously forecasted range of US$55 million to US$57 million. As per the company, the reduced estimate is primarily due to delays in the planned launch of new mobile and cross-platform games for the Android market. More importantly, the operating loss on a non-GAAP basis is estimated to be between $29-$30 million and the Non-GAAP adjusted net loss is estimated to be between $4-$5 million. The performance in the last quarter was good as the revenues had increased by 45% and the net loss had come down from $13.6 million to $3.14 million. The stock has done well on back of that, and has moved by 30% over the last one month. The recently announced buyback has also helped the stock remain positive. In the long term, the company has reported good growth in revenues, but the losses have also continued. Accordingly, the stock has remained under pressure and not done well for investors over the long term. There was a report that the options data indicates that the stock could surge after the earnings are announced next week. However, if the earnings are as per the preliminary announcement, then the probability of a huge surge is less. The key to sustained upward movement in the stock is remarkable improvement in the bottom-line. The revenue growth is likely to continue, though the pace may not be that great. Social media is evolving and there are players like IZEA (IZEA) who specialize in native advertising / social media sponsorships. For Renren, more than 60% revenues come from online gaming, and online advertising contributes less than 25%. It will be interesting to see the details of the earnings.
The last earnings had led to a correction in the stock as the company had reported a larger than expected net loss. However, on a yoy basis the net loss had declined substantially. In Q4'12 it had reported a profit of $7.22 million and in Q1'13 the loss was $6.07 million. For the full fiscal 2013, the company expects an EPS of $0.52. This implies that it will be able to report a net profit for the third year in succession. Based on the expected EPS, the valuations are likely to remain stretched, and the net margins are likely to remain low. The Q2'13 earnings are going to be released this week, and if the company can deliver some positive surprises, then the stock can regain momentum on the upside. Despite the recent correction in the stock, it is still up significantly on a 52 week basis. There have been analyst upgrades and downgrades recently. Citigroup increased the price target from $49 to $53, while Thomson Reuters/ Versus downgraded the stock to a sell. The average rating is hold and the average price target is $49, which indicates an upside of 11% from current levels. Growth in revenues is not easy as Lamar faces competition from the likes of Clear Channel Outdoors (CCO). The outdoor advertising segment itself is under pressure, and faces competition from online advertising and other forms of media. Though outdoor advertising will continue to have its place in the world of advertising, threat from concepts like social media sponsorship / native advertising cannot be ignored. IZEA (IZEA) helps advertisers leverage the power of celebrity and peer influence to attract customers. IZEA runs a marketplace wherein advertisers can pay celebrities and other influencers to blog, pin, tweet, YouTube, Instagram, etc. Other forms of advertising are also providing competition, and Lamar has to remain aggressive to continue on the growth path. Earnings will be an important trigger.
The earnings were okay with growth in revenues and net income. Strong digital spending and better than expected results in emerging markets, helped the company achieve reasonably good performance. Both the revenue and net income increased by more than 2%, and the operating margins improved from 14.2% to 14.4%. Growth in China, India, Hong Kong, Singapore, Thailand, Malaysia and Indonesia was better than expected. The stock has corrected a bit after the earnings, and is now about 10% below the 52 week high of $70 made just before the results. Still, the stock has done reasonably well over the last one year with 24% appreciation. The dividend yield of 2.5% adds to the returns for the investors. Omnicom has been a steady performer with decent growth in revenues and net income over the past few years. There has been some slowing down of the pace of growth over the last few quarters, but that may change if the company can focus on the high growth markets and segments of the advertising business. Emerging markets are extremely important for growth of ad companies, and it is good that Omnicom has been able to leverage the faster growth in those markets. Focus on emerging trends, like increased popularity of online advertising, is also important. Native advertising / social media sponsorship is also gaining in importance. IZEA (IZEA) provides a social media platform where advertisers can pay celebrities and other influencers to tweet, pin, blog, youtube, instagram etc. about their products. For Omnicom, there has been a reduction in debt from $4.44 billion to $4.04 billion on a sequential basis. The proposed merger with Publicis (PUB) is a major step for the company. There was news that an investor has sued Omnicom to stop the merger saying that the terms are unfair to Omnicom shareholders.
There have been analyst upgrades for Clear Channel recently. The recent results were better than estimates both for the top and the bottom line. Importantly, the company reported a net profit of $8.91 million or $0.02 per share for the quarter, compared to a loss of $8.12 million or $0.02 per share in Q2'12. The revenues increased marginally from $761 million to $766 million (up ~1%). The stock has done well over the past one year. It has appreciated by 48% during the period, though it has remained in a tight range over the last few months. The reason for that is that the performance of the company in Q4'12 and Q1'13 was not very good. In Q4'12, the company reported a huge net loss due to impairments and extinguishment of debt. In Q1'13, the revenues declined significantly on sequential basis, and the net loss was substantial. The performance in Q2'13 is expected to change the sentiments, and if the company reports a few more good quarters, then it may gain more strength. Outdoor advertising is facing competition from various segments of the advertising market. Online advertising is also a source of competition, and new concepts like social media advertising are gaining importance. Advertisers favor online advertising for its reach, and concepts like social media sponsorship etc. are also gaining in popularity. Social media sponsorship company IZEA (IZEA) is using the power of celebrity influence to help advertisers attract customers. Within the outdoor segment also, there are formidable players like Lamar (LAMR) and CBS (CBS). Like many other peers, CCO has a large debt on books. On June 30, it was nearly $5 billion, and the cash on books was less than $400 million. However, the recent performance does improve the outlook, and hopefully stock will continue its upward march in the medium term.
The earnings will be declared on August 8. That will be an important trigger for the stock. It had previously upped its revenue guidance for Q2 to $9 million. The upward revision led to good appreciation in the stock price over the last few weeks. It is now up by more than 80% from the 52 week low of $1.07, and has shown even more strength in the last few trading sessions. The volumes have been tremendous over the last few sessions, and the 10 day average is around three times the three month average. The volumes topped 5 million shares yesterday. Meetme had recently announced the launch of an iPhone platform and the release of a new version of its Android application. The new version provides advertisers with additional native advertising units on the MeetMe app encompassing a third of MeetMe users. Advertisers can place native advertising on additional popular sections of the MeetMe app including in Profile and Messages. All these steps are being taken to leverage the growth in the mobile advertising market. As per the management, introduction of native advertising has translated to substantial mobile advertising traction for the company. Apart from growth in revenues, if the company can show remarkable reduction in net loss, it will be a great boost for the stock. In fact, over the years growth in revenues has not been a problem at all. The competition remains strong with big players like Facebook (FB) having a global presence. Social media sponsorship company IZEA (IZEA), which is the pioneer in native advertising, is also active and helping advertisers use the power of celebrity influence to attract customers. For Meetme, the upcoming earnings will be extremely crucial in determining the short term trend for the stock. There are risks of negative surprises so one should remain cautious, but the recent movement in the stock indicates expectations of good earnings.
The stock is now up by more than 250% over the last 6 months. Going by the momentum yesterday, it could do much better over the next few weeks. The announcement by North South Holdings regarding the patent infringement lawsuit against T-Mobile (TMUS) led to enormous interest in the stock. It doubled in one day, and the volumes were in excess of 3.3 million. To put it in perspective, the average trading volume for the stock over the last 3 months is less than 100K. However, after such a huge rise, there could be days of correction. The interest in the stock could reflect the potential of the lawsuit. The market participants may also be interested in the stock because there could be more such complaints against other companies. North South is claiming that T-Mobile is infringing on a patent entitled “System and Method for Determining the Geolocation of a Transmitter” (US patent No. 5,719,584 ). The technology relates to the geolocation of cell phones on the T-Mobile cell phone network. North South had acquired this patent from Harris Corporation in 2012 as part of a portfolio of 200 patents. Depending upon the merits of the case, the potential of the lawsuit can be big because T-Mobile provides service to approximately 34 million customers. The complaint has been filed in the US District Court for the Middle District of Florida. As stated by the North South CEO (Hayes), more complaints can follow. Monetizing of other patents owned by Spherix will also gather pace after Hayes takes over later this month. He is experienced at monetizing, and is expected to be pretty aggressive on this front. Now Spherix has hundreds of patents (including that from the Rockstar Consortium deal), and the depth of the portfolio will come to light over the next few quarters.
The company recently reported good numbers and beat the street estimates for the EPS. The EPS for 2013 is expected to be in the range of $0.27-0.35 compared to the Thomson Reuters consensus estimate of $0.32. Guidance for Q3'13 is for an EPS of $0.08-0.13. In Q2'13, though the revenues were down, the company managed a net profit of $6.36 million. The dividend yield is also above 6%. The cost rationalization efforts and increase in average selling price led to improvement in the earnings. The decline in topline is likely to be arrested in the future quarters as the company is focusing on diversifying sales channels, building the innovation pipeline, and developing new creative and programs for the 2014 diet season launch. So things are looking better for the company, and the possibility of profitability on a full year basis is very high now. Due to its strong position in the market, Nutrisystem is expected to leverage the growth in the diet market to its advantage soon. Once that happens, the future prospects will improve significantly. Growth in the market will only increase the competition. Players like Medifast (MED), Weight Watchers (WTW) are likely to get more aggressive. There is also competition from other segments like the drugs / supplements market. Chromadex Corporation (CDXC) has launched a vitamin derivative Nicotinamide Riboside for weight loss / diabetes management. The recent earnings have increased the positivity about Nutrisystem's future. Citigroup has a price objective of $15, up significantly from $10 earlier. As per the analysts at Citigroup, the management appears to be successfully engineering a turnaround, and the company is still in the early stages of the growth cycle. As per the analysts, increased penetration, increase in price and focus on the high potential client segments will drive the growth further. The zero debt on the balance sheet is another reason to be positive on the company.
The upcoming earnings will be an important trigger for the stock. Analysts are estimating the company to report a revenue of around $101 million and EPS of 51 cents. For the full fiscal 2013, the revenues are expected to be $386 million and EPS is projected to be around $1.80. The company has surprised the street in the past, and hopefully, there will be some positive surprises in the earnings. A good set of numbers will help the stock to regain lost momentum. It has lost a bit of ground after a good rise recently. On the other hand, negative surprises will increase the weakness, and the correction may run deeper. The revenue growth has been very good over the years, and it is important that trend continues. The bottomline performance has not been that consistent. In Q1'13, there was modest growth in the revenues, and the net income jumped significantly by 49%. The recent correction has made the valuations better, and the stock is now trading around 21 times ttm earnings. The forward P/E of 12 indicates expectations of good growth in EPS over the next few quarters. The balance sheet is strong with very low debt (below $1 million) and around $69 million in cash (as on March 31). The net margins are a bit low at 5%, and that will be an important metric to watch in the earnings. The market for weight management is going to increase with time, and established players like Medifast are going to be benefited. The competition is also tough as there are numerous approaches to tackling obesity. Competitions comes from different segments, and big and small companies like Weight Watchers (WTW), NutriSystems (NTRI) and Herbalife (HLF) are getting aggressive. Chromadex Corporation (CDXC) has introduced a new vitamin derivative (NR) for obesity and diabetes management. Hopefully, Medifast will deliver a great set of numbers so that the stock resumes the uptrend.
The earnings have pleased the analysts, and the stock has touched new highs. JPMorgan Cazenove has revised the PT from $52 to $59, and Credit Suisse has raised the PT from $50 to $58. However, the valuations are not that cheap anymore as the forward P/E is nearly 16. Price to book is 6, and price to sales is more than 2. The good part is that the fundamentals have so far managed to keep pace with the appreciation in the stock price. Companies of the stature of GNC command a premium, but there is room for caution if the stock goes higher from here. Though there may be occasional slippages in the future, the consistent performance over the years makes investors confident that the company will continue to perform well in the long run. The relatively high level of debt is a bit of a worry for the company. The current ratio remains pretty good indicating reasonably good liquidity position. The cash is not very high, and there have been declines in the recent quarter. In Q2, the revenues increased by more than 9%, and the EPS increased by 17%. The company expanded its retail presence in China by opening a standalone store in Shanghai as part of a multi-channel distribution strategy. For the first half of 2013, the EPS increased nearly 20% . The guidance was increased, and the company now expects an EPS of $2.83 - $2.88 for the full fiscal 2013, a 21% - 24% increase over the 2012 adjusted EPS of $2.33. The growth in the overall market is likely to support the company as far as the topline is concerned. Innovative products remain the key to success, and even smaller players like Chromadex (CDXC) have made an impact with products like the vitamin derivative Nicotinamide Riboside. The future for GNC looks better after the earnings, but one should keep an eye on the valuations.