Buy_and_Hold_Pennies

[shermann7]

ALPP - Alpine 4 Technologies ...

My thoughts on stock reaction to Q2

1. I disagree that the reaction will be dictated by bottom line profitability (given we already know revenue) for Q2. As long as the gross margins are within a reasonable level (may see some pressure due to tariffs like every other industrial company that I follow), I for one won't really care. Moreover, operating income is the most important metric to watch and despite some gross margin pressure, the company could have cut costs on the G&A line to generate positive operating income. Regardless, stocks are priced off of forward, not trailing numbers.

2. Forward guidance will dictate the direction of the stock. We know a meaningful amount of new business was booked in the first half. That hasn't been aggregated into specific guidance for the back half and 2020. I also want to hear about timing for cash flow breakeven, which I believe could be as soon as Q3 but Q4 at the latest. Generating positive operating cash flow (and hopefully free cash flow depending on capex) would give the company latitude to fix some issues and potentially reward shareholders (lower debt to increase capacity for acquisitions, reduce share count, pay dividends on the C shares).

3. Share count and toxic debt. This is the most important issue to address. Eliminate the toxic debt and replace it with better financing and the stock will rerate a lot higher quickly, even with the higher share count. I've seen this before with VRU$.

4. Acquisitions. I have no particular insight as to what's in store. Personally, I think they have enough on their plate with the existing subs to create a lot of value, but the nature of ALPP is one of acquiring and optimizing. It's in their DNA.

With respect to debt, the company is always going to employ a certain amount of debt in its capital structure to finance acquisitions. It's part of their strategy and frankly, if they can borrow at interest rates in the mid to high single digits, it behooves them to use debt on an after-tax basis. Equity is simply too expensive given the current market cap. Kent has been creative with acquisition financing in the past by doing sale-leasebacks to finance purchases. This is where most of the existing debt on the balance sheet comes from and is prudent corporate finance. He understands that.

From Renegade at https://investorshub.advfn.com/boards/read_msg.aspx?message_id=150124843