The volumes over the last few days have been huge. In fact, they have been increasing, and the average for last ten days is 1.36 million. This is double the three month average. The stock has declined by 23% during the last 5 days. Compared to the high of $4.92 in July, the stock has crashed by 50%. The shorts have increased over the last couple of weeks. The percentage level on September 30 was around 24%. The news related to start of the trial in the patent infringement lawsuit against Qualcomm (QCOM) has increased the selling. The trial will be conducted in two parts. First the jury will determine whether there is an infringement. If the jury holds that Qualcomm has infringed upon Parkervision's rights, then it will determine the damages in the next stage. All this points to the negative perceptions about the future of the trial. This is also evident from the opinions expressed by several analysts. Not many expect the first stage to be crossed so the weakness may only increase. If there is some adverse news, then it is easy to imagine the fate of the already weak stock. The company has sought $500 million in damages, which is more than double the current market cap of the company. The stock had moved remarkably in anticipation of the success of the trial. Hopes were high after the Markman hearing went in favor of the company. There was always a risk associated with being dependent on the success of a single event. Several companies have realized the importance of having a diversified portfolio. Spherix (SPEX), a full service IP company has recently built up a diversified portfolio comprising of hundreds of patents. Parkervision has now come to crucial levels, and it is imperative that it bounces fast, else it may sink to much lower levels.
The stock has appreciated by 11% over the last one month. The last few days have seen upward movement accompanied by higher volumes. This indicates that there could be a few more good days though nothing material has changed fundamentally. Google has recently asked for invalidation of the two mobile advertising patents for which Unwired had sued it. Google is arguing that they both claim abstract ideas that cannot be patented. Further, the company recently announced appointment of Grant Thornton as its independent registered public accounting firm beginning for its first quarter ended Sep 30 2013. As per the company, the decision to dismiss KPMG and to engage Grant Thornton was recommended by the Audit Committee of the Company’s Board of Directors. The SEC filing in this connection mentions that KPMG’s report indicates that the Company did not maintain effective internal control over financial reporting as of June 30, 2013. Specifically, the Company has controls over the preparation of their cash flow statement, calculation of earnings per share, reconciliation of financial statement footnote disclosures and completeness of financial statement footnote disclosures. However, these controls did not operate effectively due to a lack of resources with experience in financial reporting. This is nothing significant, and the company's real problem lies in the financial performance, and being unable to deliver on its promise. Patents are big business now, and the insignificant revenues earned by the “inventors of mobile internet” is surprising. On the other hand, Spherix (SPEX), a full service IP company has recently built up a diversified portfolio comprising of hundreds of patents. It has filed lawsuits against big companies like T-Mobile (TMUS) within a few months of transformation to a patent asserting entity. Unwired needs to show remarkable progress on monetizing its patents. Till that happens, it will be difficult for any rally to sustain.
The stock has been a bit volatile recently and has corrected from the highs. Short-term volatility can be expected for such stocks, and long term prospects depend on the ability of Biozone to deliver on both the fronts, contract manufacturing and QuSomes drug delivery technology. There is another comprehensive review of Biozone on SA which recommends to buy the stock for long term. Dr. Frost owns a significant stake in the company directly and through his companies like Opko Health (OPK). MusclePharm (MSLP) has also invested $2M in Biozone to gain access to QuSomes technology. The $2 million received from MusclePharm is a significant amount considering the cash available with Biozone on June 30.Consequent upon liquidation of Equachem (Biozone's raw material selling business), the net loss has declined by 80%. The R&D spending has increased mainly to further develop the QuSomes. The company may get some pro-rata dividend from liquidation BetaZone Laboratories, a company that engages in the development, sale and licensing of pharmaceuticals and cosmetics in Latin America. Biozone owns 45% in that. Depending upon the exact amount (to be reflected in the earnings), the company's cash position could be strengthened due to the dividend. The possible uses of Qusomes outside the cosmetics market could provide it with huge benefits. The agreement with MusclePharm is also game changing both for the contract manufacturing and the Qusomes technology. MusclePharm is evaluating QuSomes technology and believes QuSomes could improve the absorption and delivery speed of its products It may utilize Biozone's manufacturing facilities for its products. QuSomes can help in reducing cost of manufacture and increase effectiveness at lower dosage. In either case, the pharmaceuticals manufacturers will be excited to embrace the technology once it goes through the usual process of approval etc. The article also mentions some risk factors so needs to read in totality.
The stock has appreciated sharply over the last few months. It is up 25% on a 52 week basis, and is nearly 33% above its 52 week low made in February. There have been positive opinions in support of a long term investment in Telefonica with a 2-3 years perspective. Better growth prospects in the Latin American markets, expected improvement in leverage position, relatively cheap valuations and expected resumption of regular dividends are the main reasons for the recommendation. Telefonica is doing extremely well in the Latin American markets, especially in Brazil, Argentina and Venezuela. These markets offer better growth opportunities compared to those which are relatively more regulated, saturated, and competitive. The North American market is highly competitive and the giants like AT&T an Verizon (VZ) are expected to face difficulties in growing the top and the bottom line. Companies like America Movil (AMX) and Deutsche Telekom (DTEGF.PK) are providing stiff competition due to lower priced and less restrictive contracts. Availability of handsets without contracts, e.g. at Walmart (WMT) stores, is also expected to make things difficult. Further, there is also an increasing demand for used phones which is making topline growth a bit more difficult. Usell (USEL), which provides a platform for buying / selling used phones, reported excellent growth in revenues in the first half of 2013. The competition is forcing some strategic consolidation, but the margins are likely to remain under pressure. As mentioned in the article, Telefonica's value is currently clouded by uncertainty about the forward dividend, high leverage ratios and integration issues. The stock may do better as the company delivers on these fronts. On the other hand, analysts at Zacks mention that the effects of reduction in mobile termination rates, increased commercial expenses, heavy network investments and a highly leveraged balance sheet could damage the company’s prospects.
Zacks has recently maintained its neutral recommendation on America Movil. They expect the company to benefit from the increased penetration of 4G mobile services and expansion of its PayTV platform. They also mention that regulatory issues, stiff competition, huge customer churn and high promotional spending could hurt the company's prospects. The recent performance of the company confirms that it is the largest player in the Latin American markets with predominance in Mexico, Brazil and Columbia. The investments in expansion of its network is robust, and the launch of the 4G mobile services Mexico will help the growth prospects. The high promotional activities may lead to lower margins, but the topline growth is expected to be decent in Brazil and Mexico where it focuses on getting contract subscribers thereby reducing the churning. The growth prospects are better compared to the giants which are operating mainly in the North American markets. AT&T (T) and Verizon (VZ) face competition from America Movil (AMX) and Deutsche Telekom (DTEGF.PK) who are offering lower priced and less restrictive contracts. Availability of handsets without contracts e.g. at Walmart (WMT) stores is also expected to likely to hurt the prospects. Also, there is also an increasing demand for used handsets which is making topline growth a bit more difficult. Usell (USEL), which provides a platform for buying / selling used phones, reported great growth in revenues in the first half of 2013. There is some strategic consolidation going on, but the margins are likely to remain under pressure in the short term. For America Movil, the PayTV segment is doing great, and is one of the major contributors of revenue. However, this is a low margins business, and is expected to put pressure on the overall margins. Zacks also mentions that the new telecom bill in Mexico is likely to adversely impact the company’s performance. The dividend yield is also relatively low.
NIMU is a high risk bet, though the rewards could be commensurate if it is able to realize its potential. So far the financials are nothing great, and the company does not have any regular stream of meaningful revenue. There is a declining trend over the past few years. The accumulated deficit is around $24 million. A recent article on SA, however, recommended to buy the stock mainly based on the prospect that OPKO Health (OPK) may be interested in the company. The author mentioned that NIMU and OPKO Health (OPK) have the same address as far as the headquarters is concerned. Dr. Frost, who is known to be astute as far as picking up companies with potential is concerned, may have invested in NIMU because its product compliments OPKO's long term strategy. Frost acquired NIMU shares at $0.05 in April. That changed the sentiment for the stock. As per the author, taking a stake in NIMU could be part of a larger strategy of Dr. Frost. NIMU's product, which can help diagnose health problems just through external sensors without invasive diagnostic procedures, is believed to have a lot of potential. It is important to remember, that the potential of the product may take time to be realized. Hence, the financials may not be positively impacted in the short term. Meanwhile, the stock has appreciated a lot, and has multiplied several times since January 2013. Despite the recent correction of 33%, it is still up 285% in 2013. Further, the recent selling by some insiders cannot be totally ignored. Frost's investments have done well recently, and pharmaceuticals / biotechnology sector has been is specialty. His investment in Biozone Pharmaceuticals (BZNE) has made a lot of news recently. Biozone owns a high potential drug delivery technology Qusomes. So, after such a huge run up, NIMU requires some significantly positive news flow to resume the uptrend.
In article on seekingalpha, Greg Miller has recommended to buy Spherix mainly based on the ability of the new CEO Hayes to successfully monetize the company's patents. Spherix has transformed itself into a patent assertion entity in a very short span of time, and Hayes has a track record of success in the IPR monetizing field. In case of Mango Capital, which was trading at a few cents, the shareholders got a substantial cash dividends (34 cents) based on the value of its patents mainly because of efforts of Hayes. He has experience in consulting, brokering patent sales between buyers and sellers, patent price arbitrage, financing third-party patent litigation and investing in other companies that own patents. Spherix has started an investor awareness campaign and is expected to clarify its new business to retail investors. In addition to the recent lawsuits against T-Mobile, Uniden and Vtech, more litigation and licensing announcements are likely. Importantly, the company was able to obtain $2 million funding recently. However, the risk lies in the fact that patents comprise a significant portion of the assets of Spherix. Greg estimates the value to be anywhere from $50 million to $350 million. The wide range indicates the difficulty in valuing these assets accurately. However, the hundreds of patents make the patents portfolio diverse, which increases the probability of monetizing. Hayes, who has experience in the industry must have evaluated his options based on the value of these patents before joining as CEO. Secondly, the capital structure is larger and the low float makes the volatility extremely high. The good part is that the patent monetizing sector is upbeat right now, and 2013 is expected to be even better than 2012. So the growth potential is high, but the risks are also large. More announcements from the company will further clarify its future strategy.
The stock has corrected from the highs and is down nearly 19% in one month. Despite the correction, it is still up 385% in 2013. The merger with TransEnterix has boosted the stock's fortunes. The joining of Joseph Slattery is expected to help in development and commercialization of SurgiBot robotic system. He has relevant experience in medical technology companies. Dr. Frost's investment is one of the main reasons for investor interest in the prospects of the company. He has a significant stake in the company and has also joined the board. The merger is a significant event and future will be heavily dependent upon the synergies between the two companies. The merger is expected to help TransEnterix build upon its ability to bring flexible minimally invasive surgical technologies to market. Importantly, the funds raised by SafeStitch will help the combined entity develop its robotic system SurgiBot and other products. It has got access to the resources it requires to continue developing devices and to begin marketing them. SafeStitch had recently raised $30.2 million in a private placement. The TransEnterix investors contributed $19.7 million (65%) and Dr. Frost along with other investors, invested $10.5 million (35%). Such a significant investment by Dr. Frost indicates his faith in the prospects of TransEnterix. His investments in the pharmaceuticals / biotechnology sector are well known. His investment in Biozone (BZNE) has been in the news recently. Biozone owns the high potential proprietary drug delivery technology QuSomes. SafeStich has already appreciated significantly over the past few months, hence there is a possibility that the correction may run a bit deeper. Revenue benefits of the merger will take some time, so upward movements will be based more on expectations than fundamentals. On the other hand, the support of Dr. Frost cannot be underestimated. So there is always a possibility of resumption of the uptrend.
The stock has recovered a bit after a correction. It had moved up sharply, so a breather was due. It is 24% below the recent high, but is still up 48% over the last three months. The company has been in the focus recently with some analysts expressing positive opinion about it. The good part is that Dr. Frost's group owns a significant stake in the company. His acumen for investment is well known. His investment in Biozone Pharmaceuticals (BZNE), which owns the high potential proprietary drug delivery technology QuSomes, was in the news recently. Tiger Media is expected to do well in the near future based on the growth in the market in China. As mentioned in an article on seekingalpha, Tiger Media is one of the leading nationwide multi-platform media company and one of the largest operators of LCD screen integrated outdoor billboard advertising networks in China. It operates 115 large format, high-resolution outdoor LCD screens in Shanghai. The LCD screen business is expanding into other cities as well. Considering the population of these cities, the potential is tremendous. Importantly, the LCD screens are going to become interactive, and the customers will be able to interact with the advertisers online to acquire product information. This, plus the attractiveness of the eye-level screen display, increases the potential of advertising on LCDs. The company earned $2.1 million in revenues in July and August which can be extrapolated to a much higher figure if one factors the increased utilization rate over the next few months. As mentioned in the article, the maximum revenue potential from the existing 115 LCD screens in Shanghai is $140 million, and the expected EPS is around 37 cents. If one factors the future efficiencies and expansion, then this figure could be higher. This implies that the current valuations are attractive. However, one also has to keep in mind that the stock has already run up to factor a portion of these future positives.
There has been more positive opinion about the company recently. An article on seekingalpha some time back was particularly positive about the long term prospects of the company, especially after the acquisition of MetroPCS. The acquisition is expected to unlock synergies leading to significant reduction in costs. The roaming and backhaul costs are expected to come down and lead to an expected savings around $800 million to $1 billion. The company is in a position to increase its market share, and the aggressive marketing, improved network experience and a full range of smartphones will help the company post good topline growth. The Q2'13 performance was good as there was good growth in revenues both sequentially and on a yoy basis. The ARPU is expected to be better in second half of 2013. The smartphone sales, which showed excellent growth in Q2'13, is expected to drive the growth in subscriber base and help increase the ARPU. The less restrictive contracts of T-mobile are expected to make it difficult for the top two giants Verizon (VZ) and AT&T (T) to attract and retain subscribers. The company is working to increase operational efficiencies by reducing operating costs and reducing bad debts. Surely, the giants and other smaller competitors are expected to retaliate by strategies to counter the moves by T-Mobile. AT&T's (T) acquisition of Leap (LEAP) is also expected to make things difficult as Leap operates in many areas where T-mobile operates. In any case, the competition will put some pressure on margins as competition is likely to be more price based. Further, recently Spherix (SPEX) has filed a patent infringement lawsuit against the company. The real impact of the efforts by the company will be visible over the next few quarters. In case the company is able to show growth along with improvement in margins, then the outlook will surely improve.
The stock has not done much over the last one month, and higher levels have seen selling pressure. The last earnings were much better than estimates, but the adverse court ruling led to a crash and dampened the sentiments significantly. The stock has recovered a bit after crash, but the volumes have remained low. There is no momentum on either side, and the stock may be looking for cues and triggers. The earnings which are expected to be released on October 30 are expected to provide the next trigger for the stock. It will determine the short term trend of the stock. If the company is able to beat analyst estimates again, then the stock may resume its uptrend. The high level of shorts will also add to buying pressure in case there is a significant positive surprise. On September 13, the level of shorts was high at around 9.3% (3.79 million shares). Considering the 3 month average volume of 307K, the number of days to cover is a bit high. The consensus rating of the stock is buy and the average price target is $49 which indicates significant upside potential for the stock from current levels. Thompson Reuters recently upgraded the stock to buy. The company is expected to do well in the long term based on the expected growth in the market. The patents provide it with a stream of licensing revenues. Companies are getting more conscious about optimizing the value of their patents, and the last couple of years have been particularly good. Spherix (SPEX) has recently filed lawsuits against companies like T-Mobile (TMUS) and Vtech (VTKLY) to enforce its patent rights. The good part is that Interdigital is a cash rich company with low debt. That increases the possibilities as far as future patent acquisitions and research and development is concerned.
The announcement of the purchase of device unit of Nokia by Microsoft (MSFT) has changed the fortunes of the company. The stock has surely moved swiftly to factor the cash offered by Microsoft, and there are analysts who are upbeat about the long term prospects of the company after the deal. In addition to the cash, which will be a major portion of the market cap of the company, the sale of the loss-making unit will have other positive effects. An article on seekingalpha mentions that the sale of the unit will improve the financials significantly and strengthen the balance sheet. In any case nothing great was expected from the unit with competition in all segments of the handsets markets increasing substantially. The smartphone market, with players like Apple (AAPL) and Samsung (SSNLF.PK), is increasingly getting crowded with smaller, local players around the world. Even used devices are increasingly being preferred, and the resale value of Apple products is a source of competitive advantage which companies like Nokia do not possess. Usell (USEL), a company which provides a platform for buying / selling used phones, reported great growth in revenues recently. In addition, the patents portfolio of Nokia is expected to bring in revenues, and even Microsoft will pay them a substantial sum annually for the next 10 years. Other business segments like the Nokia Siemens Networks may also do well going forward. Overall, it will be a more cash rich company with the main overhang being out of the way. The perspective may take time to change, but the markets may begin to factor the long term benefits of the deal. However, the recent appreciation in the price has factored most of the short term positives. Future success will depend on how it performs in the remaining business segments. It will be interesting to see the operating results after the deal is closed.
The last few weeks have again shown that the stock is locked in a range. Good news takes it higher, but selling pressure brings it closer to the strong supports around $35-36. There are hopes of improvement in fundamental performance over the next few quarters due to new launches. An article on seekinglpha mentions Niaspan's launch as an important achievement, which may help it partially make up for declines in sales in the first half. The annual sales of Niaspan were $1.12 billion as of June 2013.The author mentions that Teva also has a pipeline of several generic drugs which are likely to be launched later this year. The company has also received FDA approval for marketing and developing the generic version of Roche's (RHHBY) cancer drug Xeloda. Sales from this drug may also help improve the topline in due course. The stock is trading at decent valuations, but the declining sales and bottom-line makes it difficult call the valuations cheap. Further, Copaxone sales are expected to decline next year onwards, and that could put serious pressure on the revenues. Another article on SA mentions that 'Copaxone is already operating in an increasingly busy category with stiff competition from other injectable drugs, but will face a tougher time in future with the advent if orally-active MS drugs, notably Novartis' already-marketed Gilenya (fingolimod) and Biogen Idec's BG-12 which is tipped to be a big earner in future.' Considering this, it may not be such an easy ride for the stock. Support of Dr. Frost does help bring in some positivity as several of his recent investments have done great. He always explores possibilities of collaboration between his companies e.g. OPKO Health (OPK) is actively working to explore possible uses of Biozone's (BZNE) proprietary drug delivery systems (QuSomes) to improve cost efficiencies in manufacture of formulations. However, ultimately the stock will move on fundamentals and the next few quarters will be critical.
The stock has done great in 2013 with a huge 167% rise. Recently it has been a bit volatile, but that can be expected after such a huge run up. There were some high volume trading days, with good price action, but there was selling pressure at higher levels, perhaps due to profit booking. In fact, it has been a great year for several of the companies where Dr. Frost has a stake with double & even triple digit returns. His investments in Biozone Pharmaceuticals (BZNE), which owns the high potential QuSomes drug delivery technology, has been in the news recently. Castle brands is expected to do better over the next few quarters. A recent article on seekingalpha mentioned that the company is expected to turn profitable by March 2014, and the growth in the market will help it post good growth in top-line. There are risks associated with such investments as things may not work out as per plan, but the rewards are equally commensurate in case the promises are fulfilled. So those with a long term perspective and the required risk appetite can initiate a position in the stock. It is important to remember that the track record so far has not been that great as the company has been reporting net losses for several years. It carries a huge accumulated deficit. There are risks related to liquidity and dilution concerns. However, the expected profitability, experienced management, and expected high sales growth could help mitigate these risks over time. According to the author, Castle Brands has a strong portfolio of premium brands, and has strong potential for developing a break-out brand success and attract new premium brands. It could cross $1 if it is able to achieve profitability by early next year as per expectations.
The stock has been a bit sluggish recently. It has corrected about 15% from the 52 week high of $2.02 made in July, and seems to be waiting for cues to make a bigger move. Despite the correction, it has done well by appreciating around 36% on a 52 week basis. There have been some small purchases by insiders, and that could become a clue if the sizes of the purchases increase. Further, the volumes need to be watched to notice any change in sentiments. The company is very close to making a turnaround, and the market may begin to factor that possibility if the next earnings report is good. The current price to sales ratio does not factor the possibility of a turnaround. Revenue growth has never been a problem for the company, and the rise over the last few years has been exponential. The problem is the bottom-line, which has largely remained negative, and the accumulated deficit is huge. Revenues in 2012 were $650 million and the company seems to be on course to posting good topline growth again. The ttm revenues are $684 million, and the net loss is around $15 million. In 2012, the net loss was around $16 million. So the performance in the next few quarters will be critical in determining whether the recent improvements are due to sustainable improvements in efficiencies. The backing of Dr. Phillip Frost is surely a sign that he is confident about the future prospects. His success stories in other sectors (pharmaceuticals and biotechnology) are well known, and recently he has begun to eye other sectors also. Biozone Pharmaceuticals (BZNE) is one story which has great potential. The Q3 earnings could be the next trigger, and hopefully the company will deliver a good set of numbers so that the uptrend resumes.
The article on SA a few days ago covered several aspects of the future potential of Biozone. Most of them, like limited downside potential due to revenues from the contract manufacturing business, and the huge potential of the QuSomes drug delivery technology, have already been mentioned in most articles about the company. The author also mentions that the potential of QuSomes technology is confirmed by the fact that a company like MusclePharm (MSLP) invested in Biozone months after investment by OPKO Health (OPK). Dr. Frost and other investors, must have seen great potential in the technology based on results from the research so far. The author mentions that 'there must be something very innovative about the QuSomes technology and Biozone's ability to manufacture it for multiple different products.' In case OPKO begins to manufacture even one of its products based on the technology, that would confirm its commercial viability, and have positive effects on the contract manufacturing business. Further, the contract manufacturing business revenues are likely to receive a boost in 2014 even if MusclePharm contracts a portion of its production to Biozone. Analysts are in favor of following the smart money, and Dr. Frost's track record indicates that he has huge faith in the prospects of Biozone. This is reflected by the huge stake taken by him directly and through the companies where he is at the helm. Companies like Opko and MusclePharm are already doing well, and Biozone can follow if it begins to realize its potential. The next few quarters will be interesting to see how the events unfold. There are obvious risks when one invests in a company like Biozone and volatility may be high. However, backing of investors like Dr. Frost provides assurance of financial support which is ever so critical for companies at this stage of the business cycle.
The stock has done well over the last few months mainly based on the proposed acquisition by AT&T (T). The stock had been under pressure for years, but the announcement changed the game overnight. Years of losses had put pressure on the finances of the company, and the stock remained under pressure. Zacks has a neutral rating for the stock with the price target at 16. In Q2, Leaps had missed Zacks' estimates for top and bottomline. The analysts anticipate that continued loss of subscribers coupled with significant increase in promotional activities may put pressure on profitability. However, they are optimistic that the launch of smartphones coupled with the slashing of non-profitable subscribers may drive ARPU in the near future. Even other analysts are not so upbeat on the stock as Raymond James downgraded it from market perform to underperform, and analysts at Wells Fargo downgraded it from outperform rating to a market perform rating based on valuations. The recent run up in the stock price has factored most of the positives, and the future is more linked to the acquisition and the performance after that. AT&T has its own struggles as there is increased competition from other players like America Movil (AMX) and Deutsche Telekom (DTEGF.PK). These companies are also offering lower cost, less restrictive prepaid and postpaid services which may dent into the company's topline and put pressure on the margins. The acquisition of leap may help, but operational efficiencies are required to make it a positive contributor. The sector also faces indirect competition from the used phone market which is likely to have its adverse impact. The price conscious customers do not mind the previous version of a good quality used high end phone handset. Usell (USEL), which provides a platform for buying / selling used phones, reported phenomenal growth in revenues in 2013. Future depends on how the joint entity can leverage the synergies for improvement in business performance.
There have been a couple of articles on SA regarding the future prospects of Verizon. One author has recommended to buy the stock based on safety of investment and dividend income. The author mentions that Verizon has better gross and net margins as compared to AT&T (T) though the debt is relatively higher. The difference between gross and net margins is low and hence improvement in efficiency can help it quickly improve the net margins. Another author recommends to sell Verizon due to expected increase in competition leading to reduction in margins. Threats from competitors like America Movil (AMX) and Deutsche Telekom (DTEGF.PK) can put pressure on the bottom-line, and also make it difficult for the company to maintain the revenues. These two companies are huge in their respective countries, and have begun to increase their penetration in the US market based on lower cost products. The plans, both for post and prepaid, are less restrictive. The longer period contracts being offered by Verizon may not be so popular going forward. Phones are also available without contract from other stores like Wal-Mart (WMT) which offer latest versions. In addition, the demand for used phones is also increasing, and resale value is becoming an important consideration in the minds of customers. The price conscious customers do not mind used handset of a good quality high end phone (previous version). This way they can possess phones from high end brands like Apple (AAPL) at an affordable cost., instead of going for lower rung brands. This is more preferred because two consecutive versions of phones are not always so different in technology or features. Usell (USEL), which provides a platform for buying / selling used phones, reported phenomenal growth in revenues in 2013. This indicates the increasing demand for used phones. However, Verizon can surely be expected to take more strategic steps to counter the competition.
The first half of 2013 was much better than the first half of 2012. The revenues increased exponentially from $836K to $2.27 million on a yoy basis. The H1'13 net loss was $2.69 million compared to $7.26 million in H1'12. The loss per share was 4 cents compared to 77 cents in H1'12. The decline in net loss in Q2'13 was also significant. In Q2'13 the net loss was $1.13 million compared to $6.14 million in Q2'12. The net loss per share declined to 2 cents from 47 cents during the same period. The revenue growth was also good. The revenues increased from $591K in Q1'12 to $1.2 million in Q1'13. It is important that this trend continues and the company is able to improve the net margins consistently over the next few quarters. That will help in changing the outlook towards the company. Revenue growth is likely to remain robust due to the expected rise in demand for used mobiles. Usell is expected to benefit from the launch of the new versions of iPhone and other smartphones. Customers prefer to own the latest release of the mobile phones and want good value for their existing ones. Resale value is likely to become increasingly important over time because the technological gap or differences in features between two launches may not always be disruptive or remarkable. So some of the price conscious customers, who want to use smartphones from higher end brands, may go for used handsets rather than going for the costlier latest versions. Either way, the demand for used phones is likely to increase. Resale value will be used as an important competitive advantage, and Usell can be expected to take advantage of the increase in demand. Further, the launch of the applications like Usell Current, will help the customers get real-time information about the value of their phones / deals etc.
The last one month has been better as the stock has recovered from the correction. It is up 10% over last one month. It is up 78% on a ytd basis, and has done well even over the longer term. Fundamentals have improved over time, though the last earnings were not as per expectations. Viewed in isolation they were not bad at all. The revival in the stock has again taken the valuations a bit higher. Now the P/E (ttm) is around 21.5 and the forward P/E is 16.6. Price to sales is 4.22 and price to book ratio is 2.3. The ttm profit margin is around 20%, with revenues around $217 million and net income of $43 million. The balance sheet is strong as the company has $259 million cash and zero debt. Earnings for the third quarter will be crucial in determining the short term trend for the stock. It is important that the estimates are exceeded so that the uptrend can gain strength. The earnings are about a month away. There has been some selling by insiders recently though that could be attributed to different reasons. There have been articles recommending to buy the stock based on the future prospects. The unique business model of RPXC has been highlighted as a reason for being positive about the stock. The market is growing and the potential is huge. Spherix (SPEX), which had recently acquired several patents, has filed claims against big companies. The SA article last month stated that RPXC is undervalued because the entire company can be bought for less than the cost of its patent portfolio. Recently, there has been an increasing desire amongst companies to pursue different strategies for monetizing the value of their patents. Many prefer to avoid the costly and time consuming litigation route. RPXC has the expertise to leverage the growth in demand to its advantage.