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The growth in the vitamins & supplements industry is expected to help companies like Vitamin Shoppe to maintain good growth in the top line. Improvement in the overall economy will also have its positive effects. So the turf is pretty good, and the performance in the last two quarters has been okay. The guidance has been a bit muted, and that has led to some disappointment. This is reflected in the performance of the stock which is now about 27% below the high of ~$65.9. However, the last one month has been good with a 8% rise. The upcoming earnings will determine the short term future of the stock. While the growth is likely to continue, the margins will be the key metric to watch. In the last earnings, the revenues had increased by 12.5% and the net income had increased by 14% on a yoy basis. Sequentially, the growth in revenues and net income was much higher. The key to success is launch of new products which can bolster growth and improve the margins. It is expected to launch a couple of new products later this year. There is no dearth of innovative products in the market. Chromadex Corporation (CDXC) recently launched Nicotinamide Riboside, a vitamin derivative expected to be used in a wide variety of indications, including obesity. Growth in the direct channel segment is likely to add to the pace of growth for Vitamin Shoppe, and the contribution is going to increase over time. In Q2'13, revenues are expected to increase by around 16%, and the EPS is likely to grow by 9.1%. This indicates that there may be some pressure on margins. If the company can beat these expectations, the stock may gain strength. The full year's average estimate for revenue is $1.10 billion ($951 million in 2012), and that for EPS is $2.29 ($2.03 in 2012).
The upcoming results will determine the short term trend for the stock. It has done well recently with a near 30% rise from the lows. It is now taking a breather, and has corrected a bit from the highs. The appreciations is on the back of a healthy 10% rise in the price of gold, and it is important that gold continues to show strength. Corrections need to end quickly, and $1300 odd levels have to hold. On the upside, if gold can rise about 3-4% from current levels, then the short term outlook will surely improve. Things are better than what they were a few weeks ago. Pershing Gold (PGLC), a development stage company, started expansion of its exploration activities recently. So there are indications, but there is also a lot of skepticism about the future trend of gold. Bears have had a good run over the last few quarters, but they may not be too comfortable above $1350. The appreciation in FNV has stretched the valuations a bit, and the trailing P/E is now around 65, and it is trading at a forward P/E of 42. The price to sales is nearly 14. While streaming companies may command a premium due to the low risk business model, FNV does not compare too well with some other streaming peers. So it is important that the company delivers a good set of numbers, so that the valuations improve. Considering the pressure on margins of other companies, that seems a bit difficult. A positive surprise in Q2'13 can surely take the stock much higher as it has show a lot of strength recently. The balance sheet remains healthy with zero debt and a good amount of cash. The earnings of other major gold producers also need to be watched to get an indication of the overall health of the sector.
The earnings will be released in a few days. That will be an important event for the stock, and it is important that it delivers better than expected numbers. This is especially true due to the recent appreciation in the stock. It is about 50% up on a 52 week basis, and nearly 30% up on a year to date basis. The reduction in losses and increase in revenues over the last few quarters has improved the sentiments for the stock. As per an article on the fool network, average analyst estimates for Q2'13 predict that the company's revenues will increase by 20%, and it will report a net loss of 7 cents per share. In the last quarter, the revenues had increased by 17% and the net loss had reduced significantly from $6.55 million to $3.5 million on a yoy basis. Even sequentially, there was growth in revenues and reduction in net loss. As mentioned in the article, the gross margin was 23.1%, 20 basis points better than the prior-year quarter. Operating margin was -3.0%, 440 basis points better than the prior-year quarter. Net margin was -3.1%, 470 basis points better than the prior-year quarter. The full year's average estimate for revenue is ~$394 million (~$331 million in 2012), while the net loss is expected to be 33 cents per share (59 cents in 2012). The management has achieved visible results by improving the margins, but full year profitability is still a bit far away. The topline growth needs to continue, but it is important to focus on higher margin products so that the improvement in margins continues. The growth in the market is likely to remain reasonable, with big and small players bringing new innovative products. Chromadex (CDXC) is in the news for its molecule Nicotinamide Riboside (a vitamin derivative with use in multiple indications including obesity), and there are other players which are attempting to leverage the growth story. For Vitacost, the next earnings will be extremely crucial in determining the short term trend.
The rebound in gold has led to strong appreciation in many stocks over the last few weeks. Now IAG is up 25% in one month, and that is after a correction from the recent highs. Gold is close to crucial hurdles, and if it rises about 3-4% from here, the short term trend will get even more positive. The earnings are going to be released in a couple of weeks, and that will be an important trigger for IAG. In the last quarter, the revenues had fallen by 14% and the net income had declined by 90%. Importantly, over the last few quarters the cash on books has reduced and debt has increased. Though the expectations are not high from gold companies, it is important that there are no negative surprises in the earnings. This is specially important after such a strong appreciation in the stock. Analysts at Moody's had recently stated that it is important that gold companies control their costs in this uncertain environment. In case gold falls below $1300 or becomes more volatile, there is a possibility of downgrades in the sector. However, IAG has taken necessary steps to control costs. It is surely far away from being a low cost producer, but it is possible for it to slowly get there. Other companies like Eldorado Gold (EGO) have much lower all-in costs, and even a development stage company Pershing Gold (PGLC) is expected to have costs as lows as $800-900 per ounce. IAG had completed comprehensive cost reviews at all operating and exploration sites and corporate offices to identify specific areas to reduce costs. It has specific plans in place to reduce capex and opex. It is important that there is a reflection of these measures in the upcoming results. The most important factor in the equation is how the gold prices behave over the next few weeks. $1300 zone needs to hold, if tested.
The upcoming Q2'13 earnings will be an important trigger for the stock. That will indicate whether the recent cost rationalization measures by the company are having a meaningful impact on the company's bottomline and the cash position. In the first quarter, the revenues had increased by nearly 19% on a yoy basis, and even sequentially, the decline was not very large. However, it had reported a huge $45 million net loss compared to a $67 million net profit on a yoy basis. EGO has already appreciated significantly from the recent lows, and it is important that there are no negative surprises. In any case, the expectations are not going to be very high as the sentiments for the sector are still not very strong. Gold is within striking distance of crucial levels, and a 4-5% up move from here could signal more positivity. The stocks will surely follow, and low cost producers will be at an advantage. There have been a few articles on insidermonkey, seekingalpha mentioning EGO and some other companies like Pershing Gold (PGLC), a development stage company, for their extremely low expected production costs. Slipping below $1300 will not be good as that will dampen the sentiments. EGO has been a preferred stock of many analysts because of its low production costs. The leverage and cash position of EGO is relatively better, though the valuations are not that cheap anymore. Further, exposure to different political environment has its own risks. Moody's had recently stated that they want gold companies to reduce operating costs, defer capital spending and idle the higher cost mines so that they can survive in the low price scenario. Otherwise, it may be forced to consider downgrading some stocks. Basically, low cost, lower leveraged, higher cash companies will rebound faster than others whenever gold makes a strong comeback. EGO can be a good bet, and the earnings will provide an indication.
While the appeal by Apple (AAPL) was expected and anticipated, the news has put some additional pressure on the stock. However, many believe that VirnetX will ultimately prevail in the court, and the appeal will only delay the inevitable by 12-18 months. Furthermore, the amount of the claim will obviously keep increasing due to interest etc. The stock had shown strength by recovering smartly from $16 to $24 after the crash due to the adverse judgment in the Cisco (CSCO) case. So the stock can make a comeback even now. However, things may not be that easy. Die hard VHC investors who believe in the strength of its patents surely would like to stay invested through this period of wait. In any case, $16 is a crucial support level for the stock. It is unlikely to be touched soon, but surely needs to hold if tested. A break below that will signal additional weakness. The management of VHC expects to prevail in the appeal. In addition, there could be news related to the other trials also. Sole dependence on these lawsuits obviously makes the stock a high risk / high reward play. So one will have to live with these wild fluctuations if one wants to remain invested. There are many companies which have reduced sole dependence on lawsuits by diversifying their business models. Spherix (SPEX) was mentioned in one seekingalpha article as a company which has become a full service patent company and also acquired numerous patents. Another seekingalpha article had expressed a lot of confidence in the long term future of the company. For VirnetX, the shorts were amazingly high on July 15, and it will be interesting to know the latest data. Hopefully, there will be some good news and the stock will try to regain respectable levels soon.
The USPTO's confirmation of the validity of all of the underlying claims of the '420 patent involved in litigation with Google (GOOG) is a big positive for Vringo. The reaction was not that great, but that could be because investors realize that the final outcome could still take a lot of time. The ups and downs in the stock over the last few months have made people skeptical, and it seems that many have not realized the importance of the confirmation. However, the downside risk is definitely much less now. Even before this confirmation, the stock had repeatedly bounced from $2.75 levels, and now the supports could be higher. Being negative on the stock is not a very good option anymore. Google has surely succeeded in delaying the matters, and even the news about the workaround has dampened the sentiments related to the stock. However, the workaround details are not there, and will need to proved anyway before one takes a call related to future royalties. So all this news flow has made Vringo a stock for the believers, and not the people who swing with the news. Those who believe the underlying story or the strength of Vringo's claims are not speculating on the verdict, rather they are making an educated guess or a conscious decision to remain with the stock. Vringo has been an interesting story which has inspired many small companies to take on the biggies for optimizing the value of their patents. Companies have even changed their business model to leverage the growth in the IPR monetizing business. As mentioned in an article on seekingalpha, Spherix (SPEX) is a recent example of a transformation. The probability of Vringo's success is definitely higher, and the believers may be rewarded in the long run. Of course, no one can claim to be totally sure about the outcome or the time line.
The upcoming earnings will determine the short term future of the stock. It is up 240% from the all time low of $2.6 made in November 2012, and is up nearly 80% on a YTD basis. So it has surely done great for investors over the past few months. Over the longer term, it has failed to reward investors as it is still way below the initial price. Growth in revenues has not been a problem, and the main concern is the bottomline. In the previous quarter, the revenues had shown modest growth, and the net losses had declined. If the company can continue the revenue growth, and also show remarkable improvement in the bottomline, then the stock can gain more strength. After such a strong rise during the last few months, slippages in the earnings will not be taken too kindly. One needs to tread with caution, and realize that taking the earnings exposure is usually risky with equal chances of success and failure. A seekingalpha article had recently painted a not-so-good picture of the company. The article had mentioned that a closer look at the recent earnings indicates that there have been some declines in key metrics like gross profit margin, and the main business has not been doing that great. Competition provided by companies like eBay (EBAY) and Amazon (AMZN) makes matters difficult. Further, the patent infringement lawsuit filed by Blue Calypso (BCYP) is also likely to remain an overhang. The trial for that is approaching, and one of the defendants has already entered into a settlement with Blue Calypso. So the analysts are getting a little skeptical about further rise of the stock. However, one can not discount the brand strength and the size of Groupon. In the recent past, several other companies have also managed to prove the analysts wrong. Groupon surely has the potential to do so.
The earning were very good and the stock is likely to get a good boost, at least in the short term. The full year guidance was also raised. The important thing is that the losses have declined significantly. The net revenues were up 69% to $55 million, and the net loss declined from $2 million to $878K. The adjusted EBITDA was $7.8 million compared to $1.6 million (nearly 5 times). The other metrics, like cumulative reviews (up 41% to 42.5 million), average monthly unique visitors (up 38% to 108 million) and active local business accounts (up 62% to 51,400), have also shown good growth. This performance indicates that the prospects are improving, and the focus on improving the margins is yielding results. As per the management, the company launched new features on the mobile app and created a Call to Action feature, another way to close the loop between consumers and local businesses. The focus is likely to remain on “driving innovation in mobile, integrating Qype, and closing the loop with local businesses." The guidance for the next quarter is for a net revenue of $58 million to $59 million and adjusted EBITDA of $7.5 to $8.0 million. For the full fiscal, the net revenue is expected to be $222 million to $224 million and adjusted EBITDA around $27 million to $28 million. All this indicates good growth prospects, and if the net margins also show improvement, then the stock will gather even more momentum over time. The competition is surely strong and is likely to increase. There is direct and indirect competition from companies like Google (GOOG) and Yahoo (YHOO). There are issues like the patent infringement lawsuit filed by Blue Calypso (BCYP) which will remain an overhang. BCYP has got into a settlement with one of the defendants recently, and it will be good to see the progress on the trial against Yelp. However, YELP is showing good signs for the immediate future, and the future prospects are better after the earnings.
The outlook is totally different from what it was before the earnings. Though there were some upgrades and high price targets for the stock prior to the earnings, there were very few believers. Now the market cap is $90 billion, and it seems that Facebook has done something extremely surprising. Very few expected this to happen in a few days. The valuations have changed after the earnings, and hopes from the future have increased substantially. Now the forward P/E is 40, and the net profit margin is better. If this trend continues, then the fundamentals may catch up on the price very soon. The valuations may become more acceptable. In any case, these stocks are valued more on future possibilities rather than current valuation metrics. Prior to the earnings Linkedin (LNKD) was very much the favorite, and there was a lot of skepticism. Apart from the valuations, there were fears about declining popularity of the site, specially amongst the younger crowd. There were doubts that sites like Tumblr, Pinterest etc., may be attracting users, but nothing remarkable is visible so far. The increase in mobile revenues was the main surprise element, and that is expected to increase even further. More and more people are shifting to mobile devices, and Facebook has been able to take advantage of the transition. It has sufficient cash to acquire more companies or ideas which have the potential to strengthen its competitive ability. There is no dearth of ideas. Yappn (YPPN) is launching a multilingual social media platform where people can chat, discuss in their own language, without having to worry about the language barriers. The beta testing of the platform has been a great success so far. Few can afford to remain pessimistic about Facebook now. Though all is not perfect, things are definitely better. A couple of good quarters, and the stock may start to deliver on its initial promise.
The strength continues, and it is defying valuation logic. Perhaps that does not matter for many of these stocks which trade on future promise rather than current metrics. The recent high of $209 can be a hurdle, and the earnings will determine how it handles that resistance. Going by what happened to Facebook (FB), shorting on earnings can be your last trade in the market. Surely, it can also help one make a killing if the earnings are weak, but better to lose and opportunity rather than give up everything else. Holding it during earnings has its own risks so one can play as per the risk appetite. Analysts love LinkedIn, almost adore it. Some reasons are extremely logical. The competition in the professional networking is likely to remain much lesser than social networking, and the users are likely to be much more loyal. Just like Google (GOOG) practically became the only search engine, LinkedIn can gain a very strong competitive advantage if it is not challenged soon by some strong player through innovative ideas. The company has a huge number of users, valuable information, and there is a lot of scope for monetizing. Further, there is a lot of scope for improvement on the mobile interface, and it can keep tapping into innovative ideas which emerge from time to time. Yappn (YPPN) is shortly launching a multilingual social media platform where people can chat in their own language, and also has a multilingual platform for e-commerce. The beta testing of the social media platform has been a great success so far. LinkedIn can keep acquiring businesses with the cash it has, and if valuations metrics can be ignored, the stock has a lot of growth potential. But analysts have been wrong in the past. The pessimism about Facebook was proven to be wrong to an extent. Since one buys or sells to make money, the trend is surely the best friend, and LinkedIn is on an uptrend. Like always, earnings will be a bit risky. After such a huge rise, slippages will not be welcome.
The news about the closure of the deal with Rockstar has resulted in a very strong move. The volumes were high, and the price movement was significant. The company acquired a suite of seven patents that cover mobile communication devices. As per the press release, the patents are “well documented and easily understandable technology so that we can quickly proceed to seek agreements to support commercialization efforts and enforcement, if required”. The deal involves an initial consideration of up-front cash and $1,000,000 in Spherix common stock issued at $5.65 per share. In addition, Rockstar will also receive a percentage of future profits after recovery of patent monetization costs, and an initial priority return on investment to Spherix. The shares are subject to a lockup agreement whereby future sales will be possible only on achievement of certain conditions, including certain price and volume targets. As mentioned in the 8K, the issued shares are subject to a lock-up agreement, subject to certain leak-out provisions, which shall expire on the earlier of six months from the issuance of the Shares and the date that the Company's Common Stock achieves a trading volume of at least 50,000 shares per day and a closing price of at least $13 per share for a period of five consecutive days. This is actually the most important part of the announcement, which many investors may have been waiting for. The company had recently also acquired several patents issued to Harris Corporation which relate to the wireless communications and telecommunication sectors including antenna technology, Wi-Fi, base station functionality, and cellular. The incoming CEO Hayes has the necessary experience in monetizing patents, and is expected to optimize the value of the acquisitions. He is expected to pursue a multitude of options to achieve the monetization. He has helped in negotiation of these deals, and there will be a lot of hopes when he joins next month.
There is a very interesting article on IZEA on smallcapnetwork which is titled “This Stock's Annual Revenues Exceed Its Market Capitalization”. The article mentions details about why the author considers IZEA to be a stock with great potential. As mentioned in the article, BrightEdge's 2013 Search Marketer Survey indicates that 78% of worldwide brand marketers believe that social engagement will be the most valuable form of digital marketing this year. “The data mining available from Twitter, Google, Facebook, Pinterest, and the segmentation of thought leaders involved with them all, allow IZEA to precisely target advertisers' spending towards the most effective campaigns.” This allows advertisers a lower cost per interaction (CPI) compared to the competitors like Google. Researcher BIA Kelsey has estimated social media spending for 2012 at approximately $4.8 billion ($3.8 billion in 2011). In 2013, it is expected to be nearly $6 billion. IZEA's sales for 2013 are expected to be $6.7 million if the net booked sales of $2.8 million through May 2013 are annualized. It mentions about IZEA's launch of its multi-country, multi-language advertising platform (Native Ad Exchange-NAX) later this year. NAX will combine access to the main social media vehicles (blogs, Twitter, Facebook) through one advertiser-to-publisher matching and monitoring application. NAX will lead to addition of more countries and more social media vehicles to IZEA's existing platform, leading to more sales. A survey by comScore states that Latin America has the fastest-growing internet population. IZEA is poised to attract millions of new Latin customers in social media sponsorship arena through NAX. Billionaire investor Dr. Phillip Frost, who is known to pick stocks having great potential, has taken a stake in the company. Most importantly, the recent cost rationalization measures are showing result and IZEA is likely to achieve profitability soon. The article mentions other aspects also, so needs to be read in totality to understand the potential.
The stock has appreciated by 45% on a 52 week basis. In fact, it is up more than 90% on a YTD basis, and is still looking strong for more. The immediate trigger will be the earnings being released in a couple of days. The performance of the company has been great over the last few years. The revenues and the net income have grown exponentially since 2009, and even the recent quarters have been good. The revenue growth in the last quarter was nearly 40% and the net income increased by more than 80%. the balance sheet is strong with zero debt on books and more than $280 million in cash (as on March 31). Barclays Capital had increased their PT for the stock from $17 to $18 and Zacks have a PT of $17.70. JPMorgan Chase had downgraded the stock with a price target of $16.00. The stock has an average rating of Buy and an average target price of $17.14. The valuations are getting a little stretched with a P/E (TTM) of nearly 22. The forward P/E is around 17, and the PEG ratio is 1.71. An article on SA in June had recommended the stock for its excellent performance and strong balance sheet. One of the main reason for the bullish stance of the author was the business model of RPXC. It was mentioned that while RPXC can benefit from the regular cash flow in the form of annual subscriptions, the clients can benefit by reducing costs. Litigation is time consuming and costly. Blue Calypso (BCYP) was recently successful in getting one defendant to settle, but there have been other companies which have not been so lucky. However, the immediate trend of the stock will be determined by the earnings. Exposures to earnings are risky, and one can play based on individual risk appetite.
Earnings report is going to be released on July 30. That will be a trigger for the short term. The company had met the analysts estimates in the last earnings, but reported $0.15 loss per share. The revenues were slightly below estimates at $33.90 million. On a yoy basis, the loss had increased substantially, as the company had reported a net loss of 9 cents in the same quarter last year. The revenue growth had continued with a 34% rise. The guidance for the second quarter is for a net loss of 16-18 cents per share, and for the full year, the loss is expected to be 55-62 cents per share. The stock is down by ~15% on a 52 week basis. However, the stock has performed well over the last 3 months with a 27% rise. Over the last 20 odd months of its history, it has remained volatile. Like many of the companies in early phase of their lives, Jive has shown exponential growth in revenues, but has not been able to become profitable. Over the last 5 years, the losses have accumulated, and they have grown during recent quarters. The accumulated deficit is in excess of $168 million, and the company is not expected to turn profitable soon. However, these companies are valued more on future potential than the current financial metrics. The future of the social business segment is promising, and the company has leveraged the growth in the segment for achieving topline growth. Yappn (YPPN) is shortly going to launch a multilingual social media platform where users can meet & chat without the language barrier. Jive has done well, but the bottomline has to improve soon otherwise the recent uptrend will be difficult to sustain. Thankfully, the debt on books is low at $10 million and the cash on books was $143 million on March 31.
The performance of the stock in 2013 has been good with a 60% appreciation on a year to date basis. However, much of the spike happened in January. Recently, there has been a lot of activity due to the funding announced last month. The announcement of $50 Million financing has helped improve the outlook to a certain extent. The funds will give a lot of elbow room for the management to pursue certain aggressive strategies. The funds are to be used to support Unwired's long term mobile industry IP licensing strategy. The stock has retreated a bit from the highs. The intent of the company to pursue the licensing strategies aggressively was evident even at the time of the last earnings. The management had stated that the company would be executing a completely focused licensing strategy as a long-term industry platform for the realization of the intellectual property value across 2G, 3G, 4G technologies as well as cloud-based mobile applications and services. The transaction with Ericsson (ERIC), which had a zero cash up-front payment, was a deal with payments from Ericsson based on the revenue it generated. For example, for the first $100 million earned in revenue by Ericsson, Unwired will get 20%. The revenue flow for Unwired may take some time, but licensing is definitely a better strategy compared to litigation where the costs are higher, and risk is tremendous. There have been cases of success like Blue Calypso (BCYP) which got a settlement recently, but sometimes it takes a lot of time. Once the licensing revenues start, Unwired will be viewed in a totally different light. Over the years, Unwired has accumulated a huge deficit due to continuous losses. The situation needs to improve sooner rather than later otherwise any rally in the stock will not be easily sustainable.
The recent earnings were much better than the analyst estimates. That has given a boost to the stock which was very weak after the recent court ruling against it. It had fallen sharply, and with huge volumes a few weeks ago when the Judgment was announced. The quarterly EPS was $0.22 compared to the expectations of $0.15. That boost has taken the stock up, but the volumes have not been that convincing. The stock is approaching resistances and will be tested soon. On a yoy basis, the revenues and the net income had fallen marginally. On a half year basis, the revenue declined 19% to $115.1 million ($141.2 million in H1'12). The decline was primarily attributable to a $33.6 million decrease in fixed-fee amortized royalty revenue (the net impact of the negatives and positives of the Samsung and Sony patent license agreements). The ttm valuation appears good as the P/E is below 7, but it is strongly influenced by the abnormally high EPS in Q3'12. However, the strength of the company can not be ignored as it has a huge patent portfolio. It is not solely dependent on the outcome of these lawsuits, and has licensing arrangements which generate revenues. One negative is that IDCC is dependent on a few major licensing arrangements, and that has led to the fluctuations in revenues in the recent past. Sole dependence of certain companies on infringement lawsuits has proven to be risky. There have been recent successes like Blue Calypso (BCYP), but there have been huge failures also. Interdigital is comfortably placed on the liquidity front with $770 million in cash and the debt on books is also low at $205 million. So if the company is able to achieve more consistency in performance, then the stock can get stronger. In any case, it has appreciated by more than 50% on a 52 week basis, so very few can complain.
The stock has been pretty strong on the back of the newsflow. There have been some very high volume days recently. The settlement in its patent infringement dispute with MyLikes has increased the optimism about the possibilities with the defendants in other cases. The settlement and a licensing agreement ends all outstanding litigation between the two companies, and the royalty will improve the cash position of Blue Calypso. The settlement demonstrates the strength of Blue Calypso's patents. More importantly, settlements help avoid the costly and time consuming litigation process. A few months ago, a Seekingalpha article had given a target above $0.5 for the stock. In its report in May, Merriman Holdings had upgraded it from Neutral to Speculative Buy with a price target of $0.40. As mentioned in the report, the company has a strong set of patents, an emerging suite of software applications, some large pilot customers (including Ford), and a powerful litigation strategy playing out in the courts. The long term projections regarding the revenue are interesting to see. The revenues are projected to increase from $634K in 2013 to $25 million in 2016. The company is expected to break even around 2015. It has received continuation patents to the '516. The Company has also filed new CIPs which expand its inventions related to mobile and geo-enabled offers/coupons and rich media testimonials. The upcoming Markman hearings in August / November will keep the stock abuzz. Normally, the stocks of the plaintiff companies rise exponentially in the run-up to the Markman hearings. Some have even multiplied 3-4 times in a few months. In case there are more settlements, then surely the stock can get even stronger. However, since the immediate future is dependent on the trials, there is an element of risk which should be kept in mind. The recent settlement has increased investor's interest.
A stock which makes new highs has to be given due respect. The strength in Comcast has been pretty amazing. It has bounced back sharply after a correction, and has appreciated by 11% on a yoy basis. It has appreciated by 42% on a 52 week basis, and the investors have been rewarded with excellent returns. The dividend yield of 1.7% only adds to the attraction. The movement in the stock over the long term has been supported by good growth in fundamentals. The top and the bottom line has shown remarkable improvement since 2009. The gross and net margins have been increasing consistently. In the recent quarter, there were declines in revenue and net income on a sequential basis, but the yoy performance remained pretty good. The revenues had grown by 2.9%, while the net income had increased by nearly 18%. The upcoming earnings at the end of this month will be the next trigger for the stock. In case of positive surprises, the uptrend will gain even more momentum. On the other hand, negative surprises may lead to a correction. Earnings exposure is always risky, and recently some big and small names have disappointed. One can play based on individual risk appetite. Based on the past track record, the long term prospects remain good. The company is well diversified and remains open to new ideas & opportunities. It has recently invested fanduel.com, a fantasy sports website. The segment has already attracted investments from companies like Yahoo (YHOO) and MGT Capital Investments (MGT). However, the valuations will begin to get stretched if the stock rises further. So it is important that the fundamentals catch up with the pace of growth of the stock. This makes the Q2'13 earnings important for the short term trend of the stock. Hopefully, the company will not disappoint the investors.
The stock has done great over the past few weeks and is now above important hurdles. The volumes have not been very good, but the rise has been very fast. It is now 17% up in one month. On a 52 week basis, it has appreciated by around 75%. The current levels have provided resistance over the years and it will be great if it can cross $16.50 (the recent high) decisively. That will make the stock much stronger. The next major trigger is going to be the earnings for the second quarter (being declared on August 6, 2013). The recent rise has been backed by improvement in fundamentals. The revenue growth has not been a problem as the topline has grown from $5.4 billion in 2009 to $8.3 billion in 2012. The losses have, however, mounted. The last few quarters, the revenue growth has not been that strong, but the company reported a small net profit in the previous quarter. If this trend continues in Q2'13, then it is possible that the outlook becomes more positive. Debt remains the main problem for the company, and the interest payouts obviously squeeze the margins. The debt on books on March 31 was $13.69 billion. Considering the ttm revenues of $8.87 billion and the operating margins, this level of debt is high. Even compared to some peers, the level of debt is not comfortable. Future expansions are obviously going to be capital intensive. The Markman hearing for the lawsuit filed by MGT Capital Investments (MGT) has been fixed for next year. The immediate trigger, therefore, will be the earnings, and positive surprises may help the stock grow stronger. Over the longer term, improvement in economic conditions and discretionary spending will help in faster growth of the market. Furthermore, the company has to keep the debt in check and improve the margins.
The stock has corrected by more than 11% from the 52 week high made a few weeks ago. The volumes have not been very high during the fall, but the stock is relatively weak. The newsflow related to the Qualcomm trials drives the stock. Absence of news or negative news makes it quiet and subdued. The stock had recently found support around $4, and rebounded strongly by more than 23% before correcting. There have been many articles in the recent past about the Qualcomm case. Different analysts have different opinions about the possibilities. Management had put a huge figure on the possible claims from the lawsuit. The amount is debatable, and there are some analysts who are not so optimistic about the chances of success. One author had given Parkervision a good chance of success due to the wide net of the claims. As per that article, Parkervision has alleged that around 71 Qualcomm products are infringing approximately 86 claims from six of its patents. The fact that the Markman hearing went heavily in favor of Parkervision also helped build the optimism. The stock is three times its 52 week low of $1.48 made in October. However, there is an obvious risk of sole dependence on a single lawsuit. Some companies in the IPR monetizing business have started to diversify and build a more balanced business model. Spherix (SPEX) has recently become a full service company, while it continues to acquire hundreds of patents in different segments. Litigation is not the only preferred method, and other options are pursued. Parkervision has recently introduced three new Radio Frequency Integrated Circuits that address a variety of wireless applications. The advisors to the company (3LP advisors) are extremely confident of the power of Parkervision's portfolio. However, the movement of the stock will be in sync with the type of newsflow related to the trial.
The decline in revenues is surely alarming because of its magnitude. Companies have to maintain a level of revenues to be able to meet the fixed costs. This is especially true if the margins are not very high. The net loss in the second quarter, has stretched the ttm valuations even further. In fact, it is now carrying a loss on a ttm basis. The outlook has become negative. Wild fluctuations make it difficult for analysts to predict the forward P/E etc. The good part about Acacia is that the company does not have any debt on books. It has a good amount of cash , and the high current ratio indicates good liquidity position. Another positive is that it is operating in a business segment with good growth. There are several opportunities of patent acquisition / monetizing. However, the growth opportunities are also attracting competition as companies like Spherix (SPEX) have also become more aggressive with several acquisitions. Acacia manages hundreds of patents collections in the technology, power and other segments. The recent poor performance has been explained by the firm by stating that the financial terms of its patent acquirement contracts vary based on the sum of incomes documented each phase, the blend of copyright portfolios yielding income and the terms of contracts accomplished during the period. The bottomline was affected as the lawsuit and licensing expenditures increased substantially, mainly due to increase in examination and enforcement expenditures and advanced 3rd party consulting costs connected to licensing and enforcement plans. The company accomplished 43 novel contracts during the quarterly period compared to 38 during the last year period. So the potential is definitely there, but the last few quarters are reflecting that the company is not able to leverage the growth opportunities to its advantage. Hopefully, the next quarter will be better, and the company will get consistent over the longer term. More negative surprises will definitely cause serious damage.
Pershing Gold has commenced drilling on the North Target Area at the Relief Canyon Mine. This is the Phase I of the 2013 drilling program, and the purpose is to explore and expand the gold and silver resources. Subsequent phases will require external funding. The PEA is expected to be completed in the first half of 2014.
There have been a few articles on Spherix recently. The latest, from Greg Miller, analyzes the potential of the company in light of the recent deals. The authors mentions that the company has the backing of Hudson Bay and Iroquois Capital, and will soon own a strong portfolio of patents. The new CEO (Anthony Hayes), has the requisite experience to pursue aggressive patent monetizing strategies for the benefit of Spherix. The current low float of Spherix is mentioned by the author as another reason for being positive on the stock. However, it is important to note that the author himself does not own any shares right now, and will like to wait till more details emerge regarding expected capital structure changes from the North South deal. Another article on seekingalpha expresses confidence in the long term prospects of the company. The author considers it as a good play for aggressive traders, and is confident that the Rockstar deal is a significant positive development for the company. More details about the capital structure changes will come out soon, and it is expected that the CEO will be able to pursue different strategies for monetizing the acquired patents. Litigation against the infringers of the Rockstar portfolio is likely to be commenced soon. The 222 patents acquired from North South Holdings have applicability in several fields like law enforcement communications, military and homeland security, satellite communications, portable electronics, Wi-Fi, microwave and cellular transmission, and solar concentrator technologies, and also cover automated pharmacy ordering practices. Spherix also signed a LOI with a major private patent ownership collaboration covering additional areas of telephony and telecommunications technology. That deal is expected to be closed within the third quarter of this year. Another positive is that the company was able to obtain $500K funding at $5 per share recently. The immediate future depends on more news regarding the deals.
A PR from MGT declared that it had purchased certain assets from Fantasy Day Sports and Daily Joust. These two companies are operating in the daily segment of the fantasy sports business. The first has been in operation since 2007, and has paid a lot of money in cash prize. The second is younger, and has been in operations since last two years. The company's fantasy sports website, FanThrowdown.com also announced the largest promotion in its history, with a grand slam event with $100K in prizes. The promotion was launched with the help of rotogrinders, a daily fantasy sports news, advice and statistical site. These two announcements indicate that there has been some development in the business. The marketing efforts have started, and the infrastructure may also be improved. A good marketing strategy, and an excellent platform will be crucial for the success of this business venture. The marketing strategy may include new offerings / contests etc. to attract players. The main objective will be get more traffic on the website. To retain the users, it is imperative to have a good platform / interface so that the players like to come back for more. Work on both these fronts will be continuous, and MGT will soon have to contend with more competition as Interactive (IACI) and Comcast (CMCSA) have increased their indirect exposure to the daily segment. Success of MGT in this will change the long term future of the company. In addition, the mobile gaming business will also reach a crucial phase by the end of the year. There is also a possibility of some news flow related to the patent infringement lawsuit. However, the long term future is more dependent on how the company delivers on the two businesses. It is crucial that the company performs well in these ventures.
The stock is now about 12% below the peak. The reaction to the earnings was pretty harsh, and the stock may take some time to recover. Going by the huge volumes during the last few days of correction, it is likely that there may be more weakness and the stock may try to settle down after another dip. The valuations are obviously better, but the worries about future growth are a bit higher. In the long term, however, Microsoft is highly likely to find ways to deal with a changing environment, especially the evolution in the devices market. The inherent strength of the brand and the company cannot be ignored, but it has to deal with competition in different segments. The Online Service Division (OSD) continued to post losses, though the revenues increased by 9% due to growth in search advertising revenue. The search revenue grew due to increased revenue per search, while display advertising revenue decreased due to market pressure / competition. The shift to mobile devices will lead to some pain during transition as the value of ads is lower in case of mobile devices. Several companies, including Facebook (FB), are now focusing on building better ad products for mobile devices. Google (GOOG) is super strong in its own sphere, and advertisers are looking for new concepts to reach out to customers. Concepts like social media sponsorship (SMS) are likely to gain popularity with companies like IZEA (IZEA) attempting to leverage the power of celebrity influence to help advertisers attract buyers. In a research note, BGC had cited a few short term challenges for Microsoft. They include declining PC sales, challenges to Office software due to productivity tools by competitors on notebook computers, increasing losses of the online division and the short term distractions caused by the reorganization. Innovation will remain the key to success.
The stock has remained resilient after the earnings. There was a dip which was bought. The were some negatives in the earnings, but there were some positives also. Average cost-per-click decreased by around 6% yoy and 2% sequentially. The decline could be part of the process of transition related to increased usage of mobile devices compared to PCs. So this effect may continue for a while, and may affect the financials in the near future. Competition is definitely there, but Google has the power to take on the players. Facebook (FB) is looking for answers, and Yahoo (YHOO) has still not done anything special to increase ad revenues. Successful apps like Waze are being successfully acquired to strengthen its position, and concepts, like multilingual social media platforms e.g. Yappn (YPPN), can always be eyed when they mature. The valuations are still much better than other stocks which are confidently trading at 1000 times earnings purely based on the best case scenario. Google has been delivering decent growth quarter after quarter, and hopefully it will not be punished for a few quarters of slippages in the future. However, one cannot ignore that the stock price factors a lot of positives, and hence is a little bit vulnerable to correction. But going by the reaction to the earnings, it seems that right now the stock is surely in favor. It will take some thing remarkably bad to take it down. It is good to be with a stock which is in favor, and is doing reasonably well on fundamentals. Of course, there is no harm in being a bit careful. $855 will be a key level whenever it gets tested. One is reminded of Apple (AAPL) which suddenly went out of favor a few quarters ago. Prior to that it was a darling stock of most analysts.
The recent uptrend in the stock has been extremely strong. The rise has been backed by improvement in fundamentals. Net loss in 2013 was $11.8 million compared to a net loss of $34.3 million in 2012. The net sales also increased 10% in 2013. The last quarter (Q4'13) was not that great as the revenues remained flat on a yoy basis, and the net loss widened significantly from $3.3 million in Q4'12 to $11.7 million. However, this included a $10.2 million income tax expense resulting from the company's full valuation allowance against its deferred tax assets. The guidance for net sales for 2014 is for revenues in the range of $535-$565 million. The adjusted EBITDA is likely to increase by more than 70% to between $19-$21 million. The distribution segment is showing declines, while the e-commerce and fulfillment services segment is showing good growth. This is good because the e-commerce segment has better margins. The e-commerce segment can further bolster growth by using new tools. Yappn (YPPN) /Ortsbo has launched a multilingual e-commerce platform recently. Using the platform, integrated with the company's own e-commerce platform, online merchants can customize offerings, marketing messaging and emails in real time with multiple languages. This helps to create a real time experience to consumers in their preferred language without significant increase in resources or staffing by the merchant. Furthermore, competition from SaaS hurts sales of packaged software products. The acquisition of SpeedFC is also likely to support growth in revenues. Expansion of existing facilities is also likely to help. The stock has appreciated strongly, and it is very important that the fundamentals catch up soon. Otherwise, it may become difficult for the uptrend to continue. Any negative surprises can lead to a correction in the stock. Considering the recent track record of the company, one can definitely expect better performance in the near future.
Reachlocal has been a bit stable over the last few weeks. It has recovered about 7-8% from the recent low of ~$12. The stock had crashed 30% from the 52 week high made in May after the company lowered its Q2'13 guidance. However, it is still 30% above the 52 week low made in November, and seems to be waiting for the next major news flow or event to decide its course. Q2'13 earnings will be the next major trigger, and the company expects revenues of $124-$126 million and adjusted EBITDA of $5-$6 million. If it is able to beat the guidance, then the stock may get a boost, but in case of negative surprises, the stock may become weak. In Q1'13, revenues had increased by 17% and the net loss had reduced on a yoy basis. However, sequentially, the revenues were flat and net loss had increased. Still, the company seems to be well placed as compared with many other similar companies. It has improved its bottom line over the last three years, and is nearly break even on a net basis (ttm). Growth in revenues may not be that robust in the future due to increased competition from existing and emerging players. Online advertising is a very dynamic field, and even the advertisers are looking for new concepts to attract customers. Players like Google, Yahoo and Microsoft, Groupon, Angies List etc., provide competition in different segments. Companies like IZEA (IZEA) are emerging with focus on the social media sponsorship segment. One big positive with Reachlocal is that it is a zero debt company, and has good amount of cash. The company can leverage its brand strength to grow at a reasonable pace over the long term. The bottomline is also likely to improve over time if the company continues its focus on cost rationalization.
Earnings will be released on July 31. That will be an important trigger for IACI. In the last quarter, revenues had increased by ~16% and the net income had gone up by 55% on yoy basis. However, the revenues had declined by 3% sequentially. The stock has already appreciated by 37% from the 52 week low in January, and it is important that the fundamentals catch up quickly. The earnings need to deliver positive surprises, otherwise there may be a bit of correction. The recent rise in the stock has stretched the valuations a bit as the trailing P/E is now around 27. The forward P/E is around 11 and the PEG is 0.44, which indicates that there are expectations of good growth in the net income over the next few quarters / years. Since the expectations are high, there is little room for slippages. Going by the recent track record of the company, the fundamental growth story is likely to continue. The revenues have doubled since 2009, and the bottomline has improved significantly. In 2009, the revenues were $1.35 billion, while in 2012, the company recorded a revenue of $2.8 billion. In 2009 the company posted a net loss of $978 million, while it recorded a profit of $159 million in 2012. Future growth may come from new segments/ businesses, and the company can be expected to foray into new arenas. It has recently invested in DraftStreet which is involved in daily fantasy sports. This segment is likely to show tremendous growth over the next few years, and several big and small players, like Yahoo (YHOO), Comcast (CMCSA) and MGT Capital Investments (MGT), have invested in fantasy sports recently. Comcast has invested $11 million in Fanduel.com and MGT has invested in Fanthrowdown.com. If IACI delivers a good set of numbers, the recent up trend in the stock may gain strength.
The investors have been rewarded with good returns over the last one year. Clear Channel is up by 48% on a 52 week basis. Over the longer term, the story is not good as the stock has declined significantly over the last five years. In the last two years, it has fallen by 40%. The crash in March 2012, has been majorly responsible for the recent bad performance. It had recovered till Q3'12 on back of growth in revenues and decline in losses. However, the last two quarters have not been very good. In Q4'12, the revenue went up significantly on a sequential basis, but the bottomline took a hit from impairments / debt extinguishment charges. In Q1'13 also, the performance was not good as the revenues remained flat on a yoy basis, and the net losses increased by nearly 68%. The stock has corrected from the 52 week high of $8.75, and seems to be a bit stable. Further growth in the stock will depend on improvement in fundamentals. While revenue growth is important, improvement in the bottomline is even more crucial. Outdoor advertising represents only a small percentage of the dollars spent on advertising in the United States, and even that is facing challenges from new concepts / internet advertising etc. The company has made efforts to promote outdoor advertising as an effective method to attract customers, but many advertisers are preferring social media / online advertising etc. Social media sponsorship companies like IZEA (IZEA) are using the power of celebrity influence to attract customers for the advertisers. Peers like Lamar (LAMR), JCDecaux and CBS (CBS) are formidable. So the company will face challenges, but its experience and penetration cannot be underestimated. It is quite possible that the company will make a comeback, and the stock will become stronger.
The recent rebound in gold price has taken it very close to crucial levels. $1300 is within reach, and it will be interesting to see how the prices move next week. Most stocks, including Randgold, have rebounded strongly. A 8% rise of gold prices from the lows has resulted in about 16% rebound in Randgold. Some stocks have moved 25% from the recent lows. The volumes in Randgold have been very good which indicates that the technical rebound has been strong. If gold can move another 5% from here, then the technical reaction in gold stocks may be even stronger. In fact, a part of the recent move has been in anticipation of short term positive movement in gold. The sentiments remain weak, and economists and analysts have their own theories about how gold will move from here. There are several negative voices, but the positive voices are increasing. Legendary investors like George Soros and Jim Rogers are a bit more positive on the sector at current levels. Jim Rogers had stated that he would buy gold if it touches $1300 and buy more if it reaches $1200. Marc Faber had stated that a 20% rebound in gold could lead to doubling of some specific gold stocks. As mentioned in a SA article, the average cost of mining gold is around $1200. There are some mines, like development stage company Pershing Gold (PGLC), which have much lower expected cost, but the major producers are likely to cut production if the price falls below below $1200. RandGold has already take steps in reaction to the fall in gold prices. It has reviewed its operations and projects and reduced the capex /opex. So a price below the recent lows may lead to some supply / demand adjustments. If things stabilize and the gloom recedes, it may be a stock picker's market.
Newmont has fallen by 15% during the last one month. This is despite a recovery from the lows. Gold has hovered around $1280 for a few sessions now. It has not crossed $1305 during the recent bounce, and that has made the bears happy. It has also not crashed, and is managing to hold on. That gives some hope to the longs. The next few days will provide an indication of the immediate future. If the important levels are crossed, then it may lead to a technical reaction causing more momentum on the upside. No on is sure, though there are new and old theories floating around, for and against rise in gold prices. The technical analysts would like to see price action with volume, and economists are also not unanimous. An SA article recently gave a few reasons for possible upside in gold prices over the next few months. The supply demand mechanics may soon start to come into play strongly. Now mining is costlier than the selling price, so the production will decline substantially if the gold prices fall further from current levels. The average cost of mining is around $1210 or so, except for a few development stage assets like Pershing Gold (PGLC), which are expected to have much lower costs. There are several other aspects mentioned in the article, and it has to be read in totality to understand the risk factors which may render the author's theories invalid. The opinion of some big investors like George Soros and Jim Rogers is also relatively positive at these levels. Jim Rogers had stated in an interview in May that he would start buying gold at $1300 and buy more at $1200. Many of these big investors are hoping that gold would make a comeback when the currencies start to get devalued. Next few weeks will be important.
The earnings are going to be declared soon, and that will be an important trigger for the stock. Penn National had earlier given a guidance of $0.68 EPS for Q2'13. In the last quarter, there was a 17% decline in net income and the revenues had grown by 8.5%. It had missed the analysts estimates of the revenues and EPS. On a sequential basis, the growth in revenue and net income was good. The stock has appreciated by 27% in the last one year. It has shown resilience by bouncing back after a sharp correction from 52 week high. Even during the last one month, it has appreciated by 8%. After such a rise, it is important that the company delivers good numbers. Slippages or negative surprises will not be welcome, and may lead to correction. This is also true because the valuations are a little stretched now with a trailing P/E of 28. In case of positive surprises, it is quite possible that the stock tests the recent highs, and even moves beyond that. The overall mood in the market is not bad, and that will help matters (if it remains this way). The overhang of the patent infringement lawsuit filed by MGT Capital Investments (MGT) will remain over the next few months. The Markman hearing date for that lawsuit has been fixed. The analyst opinion on Penn National remains mixed, with Nomura recently cutting the PT to $60 from $66. The consensus target of the analysts is $57.54 which indicates little upside from current levels. Penn is better than many of its peers who are making losses since many years. Like others, the debt on books has increased during the recent years, but again, Penn is relatively better off on leverage. Margins will be a key metric to watch in the earnings.
The move after the earnings has been very strong. The stock has moved with a lot of force and seems to have broken out. If it manages to move above $32, it may surely be good for much more. However, that may not be easy and there may be hurdles on the way. The analysts expectations were not met, but there were some positives also. There were declines in revenues for both display and search group of services, but ex-TAC revenues for search increased due to lower TAC on that service. Investors will not worry about all this now because the stock has moved nearly 25% in less than a month. The company even acquired a couple of companies after the earnings. Admovate, the latest acquisition, is a company which focuses on mobile advertising technology that enables advertisers to create and deliver personalized offers to consumers through mobile platforms. It acquired fantasy sports app startup Bignoggins which has produced Fantasy Monster and Draft Monster. This is a high growth segment with increasing interest from players like Comcast (CMCSA), Interactive (IACI) and MGT Capital Investments (MGT). The strategy is to increase number of users accessing its platform through mobile devices. The second focus is to reduce cost. While the cost control has led to good results, the revenue declines have continued. Even if the number of users were to increase, still the revenue growth is not going to be easy because the ad rates on the mobile devices are relatively lower. Even Google (GOOG)'s earnings reflected this because the ad prices weakened. So achieving revenue growth will remain a challenge, and competition is likely to get even more intense. That will be a test for Yahoo over the next few quarters. Hopefully, it will be able to meet investors expectations.
The good Q2'13 earnings may help the stock remain strong. The net earnings were up 172% to $3.83 billion compared to $1.4 billion in Q2'12. Sales also increased 8.5% from $16.47 billion to $17.87 billion. The performance beat the analyst estimates, and the stock is likely to do well going forward. There may be normal corrections, but the long term story remains robust. The revenues and net income have been increasing even on a sequential basis, which makes the performance look even better. Pharmaceutical products and the Medical devices / diagnostic segments together comprise nearly 80% of Johnson's sales, and those segments did well. The growth in the sales of pharmaceutical products was higher (12%) compared to 10% growth recorded by the medical devices & diagnostics segment. International sales grew by 9% while domestic sales went up by 8%. Sales of Remicade, the main drug was $1.7 billion, up 9.8% compared to Q2'12. Consumer product segment recorded lower growth at 1.1%. In the full fiscal 2012, sales of this segment had declined by 2.9%. The company increased the guidance for earnings per share for 2013 to $5.40-$5.47 (excluding special items). The good capital appreciation and dividend yield have made Johnson a preferred bet for long term investors. This story is likely to continue if one considers the strong pipeline of products. However, competition from local and global players is also immense, and there is no room for complacency. Innovation is the best tool in the pharma / medical devices industry, with even smaller companies surviving on that. PLC Systems (PLCSF) a small medical devices is making a mark for itself based on a single innovative product (RenalGuard) it has created. Johnson compares well on several parameters with pharmaceutical giants like Merck (MRK), Sanofi (SNY) etc., and still looks good for more.
Novo is a good growth story as far as the fundamentals are concerned. The stock has delivered decent returns for the investors. Revenues have increased by 53% since 2009, and the net income has more than doubled during the same period. Though there were some sequential declines in the last quarter, the yoy performance was not bad. The revenues and the net income increased by 8.5% and 29% respectively. Tresiba has been launched in the UK, Denmark and Japan, and progress is expected in the US as the company is in discussions with the FDA to address their concerns. Its R&D pipeline comprises of several products at the filing or the phase 3 stage. For 2013, sales growth measured in local currencies is expected to be 9-11%, whereas operating profit growth is expected to be around 10%. The trailing P/E is around 23, while the forward P/E is ~20.5, which reflects moderate expectations of growth. The price to sales and price to book are a little high at 6.3 and 15 respectively. These metrics indicate that the stock has priced in a lot of the future positives already. However, the high profit margin of 28% and liquidity position are difficult to ignore. More appreciation is possible if the company is able to beat the guidance, or deliver some positive surprises by launch of new products. Diabetes management has numerous sub-segments with several pharmaceutical giants competing for market share. Even smaller players like Chromadex Corporation (CDXC) are actively researching on innovative molecules for diabetes / obesity management. Novo Nordisk commands nearly 50% market share in the insulin market world-wide, and is expected to strengthen its strong position with new launches over the next few years. In countries like China the market share in insulin market is as high as 60%. It can leverage its commanding position to increase the growth rate. That will translate into better returns for investors.
The earnings are going to be released on August 1, and that will be a trigger for the stock. The performance in the last quarter was not very good with decline in revenues and net income. While the revenues declined from $503 million to $486 million, the net income fell from $54.6 million to $48.75 million. The last one year has been volatile for the stock. It had fallen sharply from its 52 week high of $60 in January to the 52 week low of $40 in March. It has recovered a bit now, and is stable around the current levels. The valuations are reasonable with a P/E of around 10, but the forward P/E is 11. This indicates that the market does not expect much growth in revenues over the next few quarters. The company has to deliver a better than expected performance in the earnings, otherwise the stock may again come under pressure. Debt remains the main worry for the stock, and the company has been often criticized for taking on the debt for share repurchase. As on March 30, the debt was around $2.41 billion, and the cash on books was $121 million. Liquidity is also not very good as the current ratio is around 0.47. It is very important that the company begins to grow the revenues and net income faster, and improve the margins. Competition is increasing, and the AMA's vote for recognizing obesity as a disease will only attract more companies. NutriSystems (NTRI), Herbalife (HLF), Medifast (MED) provide direct and indirect competition. New products, like the vitamin derivative (nicotinamide riboside) from Chromadex Corporation (CDXC) are also showing a lot of promise in weight loss / diabetes management. Weight Watchers needs to leverage its unique status in the market, and also attempt to explore new methods to beat the competition. It is important to show remarkable improvements quickly, otherwise the sentiments may turn negative.
Despite the downgrade of its debt by Moody's, the stock has remained strong over the past few months. It has appreciated by 25% in three months. The earnings are scheduled for July 31, and will be a risky event for the stock. This is because the stock has already appreciated significantly, and any negative surprises will not be taken too kindly. The guidance for the full fiscal is not very robust as the sales are expected to decline by 2 to 4% on a GAAP basis. This is due to the expected impact of customer sales allowances associated with the company's device strategy. The adjusted diluted earnings per share is expected to be in a range of $2.00 to $2.10. Over the long term also, the revenue growth has been tepid, and the net income has declined. It reported a net loss in the last quarters and the revenues declined by around 8.5%. Future growth in revenues will require launch of innovative products and devices. The strong competitors like Baxter International (BAX) are known for innovation, and it is important that the company delivers on this front. The R&D expenditure increased in 2012, and the company has several products in the pipeline. However, the timing and impact of the new launches remains to be seen. Medical devices / pharmaceuticals industry is heavily dependent on new launches as patent expirations lead to sudden drop in sales due to influx of generic drugs in the market. Even Hospira is expected to face this problem going forward. Even a small medical device company PLC Systems (PLCSF) has made a mark for itself based on its innovative product RenalGuard which has received US / European patents. Hospira has to deliver good numbers in the next earnings, and also improve its performance over the long term. Otherwise, it may be difficult to maintain the positive momentum.
As per a press release by the company, Yappn has entered into an initial agreement to license its social media platform to Rallee. Rallee is a voice based iPhone and Android app for Facebook which will be rolled out in September this year. The testing of Rallee is underway, and has yielded good results. As per the agreement, Yappn will provide Rallee with the tools for enabling topic based text chat. This will allow the Rallee users to perform text chat in different languages, in addition to the voice chat being done on Rallee's platform. The users will also have an up to the minute topic feed from Yappn, including one from Facebook, Twitter, Google+, Instagram and other social media outlets in their preferred language. Even Yappn will be allowed to use Rallee technology on its platform through a license arrangement. This will allow voice chat on the Yappn platform where the users are presently able to do multilingual text chat. The combined product will be made available to international telecom carriers, and via social media networks. So users of both the platforms will be able to take advantage of the features of the other platform. Future plans are underway to make even the voice chat multi-lingual. This deal will surely help in increasing the awareness about Yappn's platform before and after its launch. Both parties are expected to benefit from the success of the other platform. The company had recently entered into an agreement with TSI Sports to begin support of online communications programs for organized youth sports teams. That arrangement is expected to provide revenue to the company from league programs and sponsorships by premium partners. The interactions amongst the players and their families are expected to be large, because each sports teams will have its own Yappn page. Further, the multilingual environment is also expected to increase the participation by the users. These deals will surely help the company in building its brand image.