bbotcs...SCKT... Patience is needed here imo. The stock isn't going to move up in price (or volume which is just as important) until they become net income positive on a GAAP basis. With time, I like this company even more than ZAGG in 2009 when I bought at $1 and sold at $6.80. I think it has the same potential (not in 6 months though, but over a longer period of time). What's important is that the company keeps moving forward.
In the last CC call, Kevin talked about continuing to boost inventory at retailers/distributors before they go after the former HP Ipaq market aggressively (so they can be sure to have product available so they become the go-to-choice as a dependable supplier now and for years to come). There are over 1M HP Ipaqs used in business that will need to be replaced someday (in 2009 HP sold over 400K and in 2010 as they were getting out of the market, they still did 200K+ units sold). Do they upgrade the hardware (and the expensive software) or do they go with the same model (with improvements) from a different supplier? Socket needs to make sure they are "solid" before they step up to the plate. They are getting there.
Since last weeks cc call, I've seen inventory at the 3 major retailers I now follow (ProVantage, Insight, BLT) up 40% in the last 9 business days. That's just what the CEO said they were aiming to do as they now are able to get on top of supply even more. It'll be interesting to keep watching this.
I still see 4th Q as a transition quarter as they get inventory supply up to 4 weeks for their Somo units at each of the retailers/distributors, drop backlog by 1M units, get sample units out to BIG buyers (ex hospital chains), and start to aggressively reach out to former HP customers telling them there is a new kid on the block that can take care of them now and in the future. (And don't forget their scanner business continuing to expand).
SCKT's gross profit margin right now is 43%! Not too shabby. The more SOMO's they sell, the higher it will go as it just means the factory that they subcontract from in China just needs to run an extra day or two during the manufacturing window at the plant. They are also leveraged on the sales expense side as well, so what they pay to retailers/distributors will be less per unit as more units are sold. Internally, administrative and salary costs will go up, but they really shouldn't be significant since they really don't have a huge need to do so for the increased sales.
I don't own SCKT cause I think they will earn $7M/quarter and start to be net income positive. I own SCKT cause I think they are going to earn $15M+/quarter in time and the amount that hits the bottom line makes this stock extremely cheap. With the tax loss carry forward they have (which is enough to last years), they could easily net $1/share if they were able to just capture a portion of the prior HP Ipaq business. The big thing here is the float and # of shares outstanding is small. It's not hard to have a huge net income number when the total number of outstanding shares (including all options and warrants...everything in time that will be added to total diluted shares outstanding) is under 7M total. They now have NO NEED to dilute anymore (other than stock option bonuses) with them being EBITDA positive and their new line of credit. It sure beats a bunch of small cap stocks that people toot about that have 50M+ shares outstanding.
I'd be buying more but I already own more than I should.
I do know this.....it's easier to get investors to buy at $8 when the story is booming than at $2.50 when it's still "potential". That especially applies to institutional buyers.
