Does anyone have a good opinion?
It is hard to understand what they own in order to give it value.
It is also hard to guess at their potential forward growth.
I'd love to hear some expectations.
Buzzz...wrong...licensing fees will still remain high even if they do manu themselves...two reasons...do you really think that C motech is jsut going to say take the hot tech to your new co...just take it...and number two waht about manu costs salaries and so on....xanadu
also - there are only 8MM shares available and 42% of this company is held by insiders. from a pure trading perspective - if some hedge fund decides to start playing this - it could easily go to $10-20 within a couple of days.
i have been a long time investor in ENCO and tehy have been having a field day with that stock the last two weeks. it has a float of 1.5MM after a reverse split and is also about 50% held by insiders. however, that company hasnt had a positive quarter in 6-8 quarters and has a lot of issues with their recent M&A activity in the past two issues. compare that with a company that IS making money, has a lot of good news on the horizon, and is aggressively growing, and the hedge funds can really jerk this one around.
i dont want to see that happen, but if it does, it will provide visibility and i will take the opportunity to trade/take profits if it is ridiculously driven up.
i completely agree on that. i was not expecting GM to be that low last quarter and dont know what affected them more - Sprint's pricing or C-motech cost. if it was C-motech cost, than the mfg through Diffon should enhance those GMs, possibly dramatically (relative to the volume spread across). however, we won't see that until Diffon manufactures those for Franklin and it appears that C-motech will manufacture them at least through the end of the year. I am sure there are contractual outs by both parties.
when i first modeled this stock, the GM and quarterly growth showed fair value betwee $5-10. revenues are up significantly but earnings are not due to the pricing pressures. goig forward, as you said, it is extremely difficult to value it with any sense of comfort and thus why the range is so great.
lets say they get 20% better pricing through Diffon than C-motech. that would have been an additioal $2.5MM in earnings last quarter and would also potentially secure the busines from Sprint as they would be competing with C-motech on an even cost basis. if you assume no growth QoQ - that is $10MM in extra earnings per year with nothing changing. dividing that by the shares and comparing that to current trading price dramatically increases the valuation on future growth which is why that high end number looks ridiculous compared to today's price.
however, this company is still in it's infancy and could easily do $150MM in revenue this year (or rolling 12 since the start of 301 sales). it could be significantly more if Spring stays with them and the ramp up remains at the current pace. it could be dramatically less if they start competiting head to head with C-motech and can not migrate Sprint to the new 600.
however, as i pointed out it prior posts, the Sprint deal is NOT the only deal and their past quarterly earnings were growing exponentially up until the slow down at the end of '08 through '09. they had VERY good numbers long before Sprint which is why i feel whichever model one uses, based on its past/current customer base, product pipeline, and Sprint/Clearwire business, it is undervalued today and should be betewen $5-10 (which is why I am an active buyer at these levels).
once again - the price will always be what someone is willing to buy it for today...
Im looking at a long term scenario.But it hard to do that when the GMs as you put it are not all but defined.We have a scenario where c-motech will not be involved so we dont know how the operations will progress from here.Its safe to say that we have a broader product line but we dont know how it will be executed in reference to historic measures as now Diffon will be the manufacturer.So while I expect this Q to come in with positive numbers I cannot determine in my own mind just where we will be going forward.
fair value keeps getting trickier and tricker with FKWL. it looks like they will be competing at some point with C-Motech on the 301 due to the end of their agreement but with the release of the 602 - they may be able to shift Sprint/customers to this modem and eliminate teh C--Motech competition. it is hard to compete against a company that has the same product and resells it to you.
the Diffon acquisition should be/is a very positive move for the company. it seems that this gives them more direct access/ownership over mfg and will allow them better GMs and no competition. it also allows Franklin to continue their product development without using additional captial on mfg. originally i thought they would raise the capital to do it themselves but this acquistion should negate that need.
i would imagine the current quarter to be announced should be probably 1.5 to 2 times the $25MM in rev of the previous quarter and GMs should be slightly improved. latin america will be a question mark depending on where the cyclic buying is at.
i have provided several valuation models over the last two years based on foward earnings and using PE ratios compared to the industry leaders and then assigning an aggressive growth PE. prior to the Sprint deal you could make a case for anywhere from $8-50 depending on how agressive you assigned a growth PE. GM are substantially down since the Sprint deal but the pipeline is extremely robust. we will have to wait to see if they can move Sprint/Sprint customers to the 602. If they do, and Diffon is manufacturing this unit instead of C-Motech, GMs should be substantially improved and revenues will dramatically increase as the 4G continues to roll out.
so - the valuation is anywhere from today to $50. ultimately - it is valued at the price someone is willing to pay but if i said that, i would have to put a tie on and go on the business channel circuit as an analyst...
i am still buying. i bought more today as i am expecting a very solid quarter. i would have bought last week but was out of the country. if it slides prior to earnings, i will continue to buy.
with $25-50MM in rev in the quarter to be announced with improved GMs and some sort of foward guidance concerning Diffon/C-Motech/Sprint - I think $5 is a very fair short term target. however, there are a lot of short term investors that have gotten in here and are skittish. i have owned this company since before teh current mgmt group so i am looking long term and not just a quick bump. if i get one - i will take some profits and buy back but that is not my long term goal.
mr smalls this is a good post and i appreciate your long term view and patience in owning the stock over the years ...
my question/comment is that it would appear quite unrealistic to expect the company to do anything even close to the 50mm revenue estimate you seem to be calling for in the 3q ended 3/31 ...
in fact, this number calls your entire credibility into question- as one must only conclude that you either have no clue what youre talking about or that you simply want to set expectations at absurdly unreachable levels in order to set the table for aggressive sell-off upon the actual report, which would then enable you to buy the shares at a kind of contrived discount if you will ...
dont get me wrong, id be thrilled if you were somehow right, but the reality is that this stock isnt priced for perfection- in fact, one could argue that if the company just managed to show seq growth from the outstanding 2Q, well that would be a tremendous feat and justify a stock price well north of today
as for margins, why exactly do you expect margins to improve- and by how many basis pts ?
dont take my tone as offensive, but rather think critically about what youre saying and tell me if you really believe what youre writing ...
i mean, you are calling for 3q revs to be 150-200% higher than 2q- really ? that implies something astronomical- almost laughable !!!
anyways- i also see that you have a potential 50 price target out there so at least you are proving to be equally whacky on all fronts and by definition consistent, even if ludicrous
last comment- pls elaborate on why sales should grow so sharply on a sequential basis
i appreciate your help mr smalls
This company is now more than a modem, they are right in the middle of a tech outsourcing trend. Franklin is small, flexible and I think, smart folks run the company.
This can be a 10$ company, I cannot see what would keep them from getting there. But as a first step $ 3 is fine with me.
"Competent folks", that is the bet and with competent folks, nobody knows forward growth but the potential is there and it does not make any difference if they are producers or resellers.
Right now, Franklin is getting a free ride on the back of Sprint and Sprint is a horse running for its live.
Now that sounds like hype, but it is only my opinion.