Thought i'd post here what i just posted over at Yahoo MB; and it's curious that JAKK's shareprice fell down today from a matched 6-month high of 9.20s early this a.m. back down to close at 6.97, just a penny above where it was when bikaver last posted to this board nearly a year ago on 10/28/2013.
I have no position in this stock but was very curious about the co. after reading Mark Gomes' piece at S.Alpha in early Oct after informing his PTT (Poised to Triple) newsletter crowd about it. An earlier Josh Arnold S.Alpha article some weeks prior to Gomes' piece was very pessimistic about JAKK's prospects and alerted me to why something like 70% of the float was short--weak profit margins after costs, and a big convertible debt overhang.
As i look over the qtrly report today, a few things stand out:
1) fully diluted shares (whereby one calculates EPS) has mushroomed from nearly 22M weighted average for the first nine months of 2013 to 45M f.d. shares with today's report for the Q3 2014 tally. That's a lot of dilutive share-growth and very likely has some analysts and big investors concerned about future EPS growth.
2) due to this increase, notice that net income was higher this qtr than in the comparable qtr last year, but this year's Q3 EPS of 1.03 was BELOW last year's Q3 EPS of 1.11 because of that dilution. And evidently something like $5.6M of this Q3's earnings were from a special gain arising from the fact that their Maui segment incurred an under-performance penalty.
3) mgmt guided for margins around 31-32% but Josh Arnold's cautionary article a few months ago calculated that JAKK's SG&A costs, including servicing their massive debt, were eating up fully 30% of gross profits, severely pressuring the bottom line.
After reading Gomes' article in early Oct. i viewed the movie Frozen & watched some of the Disney Ice Show on Youtube. I also see JAKK's many other licenses for highly lucrative past, present and upcoming franchises, and see JAKK's increasing international reach, and also see how with their DreamPlay segment they are designing more and more digital apps and robotic toys (presumably with the help of their biggest investor and his interest in robotics and interactive toys for smarter children). With all of this i can see how conceivably the company could really grow their top line over coming qtrs and years (albeit with the seasonality still hitting this and other companies like Hasbro and Mattel).
But the concern remains: can JAKK grow the BOTTOM LINE eps? Mgmt is guiding for a big YES.
Let's see what they can do...
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