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OTC Journal Members:
I haven't published any "Trading
Alerts" this summer. I won't call any edition a Trading Alert unless
I feel there is a better than 50/50 chance the stock will trade up high
enough in the short term for a quick profit. Anemic volumes and lack of
interest in the market have led to few breakouts in microcap stocks, and
I have been counseling accumulating with a long term outlook.
My last Trading Alert was Aegis
Assessments (OTC BB: AGSI) at $3.80 back on June 20th. The stock
hit a high of $4.20 shortly thereafter, and dropped back below the entry
point. Friday it closed $.05 above the entry level after five weeks. Hardly
exciting, but not bad in a declining market environment.
Even in the current tepid market,
opportunities arise which could lead to dramatic price movement. When a
company's stock is grossly oversold, and the company delivers an epiphanal
event, you can get real price movement despite the negative climate. Such
is the case with today's event. I am very pleased to report NuTech Digital
(OTC BB: NTDL) has delivered a development which could raise the entire
profile of the company. I believe there is a good chance this could send
the stock up the charts. I don't believe it is ready to eclipse the $.75
level, but $.60 to $.65 could easily be in the cards as a result of Friday's
news. That's a potential short term return of 46% from Friday's closing
ask price if you already own it or are lucky enough to grab a few shares
under $.45 on Monday morning. For your consideration:
 |
NuTech Digital
(OTC BB: NTDL) Produces Jessica Simpson Concert DVD |
|
You are looking at a picture of one
of the hottest entertainers on Planet Earth. Jessica Simpson is
everywhere, and is talented enough to deserve the fame.
Jessica Simpson's 1999 debut
album sold 1.8 million copies. After her marriage to 98 Degrees member
Nick Lachey, she was vaulted to superstardom by the MTV reality show "Newlyweds:
Nick and Jessica".
Her most current album "In
This Skin" has gone double platinum already.
Since June 1st she has been working
hard. She is wrapping up a 39 city tour. 39 performances in 60 days. On
Friday night she performed at the Universal City Amphitheater in LA,
and her final performance of the tour is Saturday night in Costa Mesa in
the Pacific Amphitheater.
ABC broadcast the The Nick &
Jessica Variety Hour last holiday season. It was a huge success in its
debut, attracting 11.4 million viewers and winning its time slot. ABC has
signed them up for more shows and the next will air over Christmas.
She is rumored to have been offered
the role of Daisy Duke in the remake of the classic TV series “Dukes of
Hazzard”, beating out Britney Spears for the role. She has also shot her
own ABC sitcom pilot about a “not-so-bright” blonde celebrity named Jessica
Sampson.
Jessica Simpson is a real
talent. She is not just a dance act with a mediocre voice (see Britney
Spears). Jessica Simpson has an incredible five octave range, and
is likely to be around for quite some time.
The Friday night performance of the
Jessica
Simpson Reality Tour at the Universal Amphitheater in LA will be recorded
in high definition video and digital sound by NuTech Digital for
release as a DVD in November (in time for holiday shopping). According
to the press release, it will be distributed by Sony.
 |
What
It Could Mean For NuTech Digital |
 |
The potential benefits for NuTech
beyond the obvious revenue surge are numerous. This is by far the most
high profile performer NuTech has ever represented. Hopefully, this
event will lead to other high profile signings, and could be just the catalyst
the company needs to get the ball rolling. This could help them evolve
their revenue stream towards content creator, and diminish their content
reseller role. Content creators always trade at a higher multiples.
On the revenue side, details of the
arrangement were not disclosed in the press release. They may never be
disclosed for competitive reasons. A deal of this nature is generally structured
something like this:
-
The initial purchase orders for a DVD
of a performer with this level of popularity should be in the 1/2 million
to 1 million unit range. Units generally sell for about $7 wholesale, so
1/2 million units would equate to $3.50 million in revenues
on the first run.
-
Generally, about 30% of the sales go
to the performer after the upfront expenses are recouped by the production
company. Therefore, Jessica Simpson will probably receive about $1 million
of the first $3.5 million in sales.
-
The remainder of the pie after expenses
will be split by Sony and NuTech in some formula which is not disclosed
at this time. NuTech could easily see $1 million in gross profits
just on the first run, and considerably more if the DVD goes into several
production runs. NuTech's cash expenses were about $2.3 million
in 2003 for the whole company. Therefore, the first run of this one project
could conceivably cover 43% of their annual overhead, leaving other projects
to generate significant profits. These numbers are just guesstimates on
my part, and have not been reviewed or endorsed by the company. We might
not know the outcome until 4th quarter numbers are disclosed sometime next
year.
As far as the stock is concerned,
there is no telling where we could end up. This is the kind of high profile
announcement which could bring a new and fresh audience to the stock, as
Jessica
Simpson is a very high profile name in entertainment.
No doubt, the stock will trade higher
on Monday morning. A surge in price and volume will bring eyeballs. The
high profile signing of the Jessica Simpson concert DVD could bring
a whole new audience to this relatively unknown stock.
Also working in our favor is the
price. The stock is very oversold, especially in light of the recent revelation
concerning the June quarter, which will be the best top line quarter in
company history by 50%. Couple that with the stock trading very close to
a 52 week low, and you have the makings of a potential price surge which
could hold and gain momentum over the first few trading days of the week.
The stock has been grinding in this
low range for three months now, so most of the sellers are probably out
of the stock. No doubt, a surge in price and volume will bring more sellers
to the surface, but the Jessica Simpson signing has the potential
to bring enough buyers to overwhelm the sellers. We'll see by the middle
of next week.
I believe the stock is going to try
to make a rebound to the middle range of its collapse: in the $.65 range.
If the company stays the current course, this is bound to happen even if
it doesn't make it next week.
For you traders, here's some guidelines.
I would not pay more than $.45 for this stock on Monday morning if you
are looking for a short term trade. If the stock opens higher, just wait
for a pullback. If it doesn't come, you will end up with a high risk entry
level if you take the plunge.
Your stop loss should be $.40. This
is for short term traders only. If you are long term, don't worry about
where it trades because it doesn't matter.
Short Term Price Target: $.60 to
$.65. You could get some backing and filling. Volume is the key. If it
holds up for a day or two, the stock could get some momentum. If not, long
term investors can continue to hold the stock with more confidence, knowing
that NuTech Digital is finally starting to make things happen in
it's effort to establish a position in the burgeoning digital home entertainment
revolution.
Here is the complete text of Friday's
press release for your review:
| Press Release Source: NuTech Digital,
Inc.
NuTech Digital and Jessica Simpson
Announce Exclusive Production Agreement for her Reality Tour
Friday July 30, 4:01 pm ET
LOS ANGELES, July 30, 2004 (PRIMEZONE)
-- NuTech Digital, Inc. (OTC BB:NTDL.OB - News), a worldwide leader in
the production and distribution of original and licensed DVD content, announced
today it has executed an exclusive production agreement with Jessica Simpson
through JT Productions for the production and distribution of an exclusive
concert of the Jessica Simpson Reality Tour. This much-heralded tour, which
is generating significant press internationally, will be produced in Hi-Definition
utilizing state-of-the-art audio and video technology to capture the full
realism of the Reality Tour performance.
``We believe that Jessica Simpson
is a powerhouse performer who appeals to music lovers of all ages -- and
will do so for decades to come,'' stated Lee Kasper, NuTech chairman, president
and CEO. ``With this agreement, NuTech has once again demonstrated its
capability to identify significant opportunity in the marketplace. It is
news to no one that the market for music on DVD has exploded and is rapidly
growing into a dominant force in the marketplace. NuTech is investing considerable
resources to ensure that this DVD and broadcast represent a true collectible
for her millions of fans.''
SONY/Columbia will be the distributor
worldwide for the DVD which will be released in November. NuTech's interests
include production and selected distribution participation.
``We are very excited to have Nutech
Digital as a partner for the DVD production of Jessica's best live performance
to date,'' noted Joe Simpson, JT Productions. ``NuTech's capabilities,
coupled to its commitment to the highest professional standards dedicated
to capturing and delivering the full realism of her stunning Reality Tour
performance, will be very much appreciated by fans the world over.''
About NuTech Digital
NuTech Digital is a pioneer in the
home entertainment product market, with more than 600 exclusive DVD titles
and a growing library of High Definition music concerts. NuTech Digital
offers original and licensed content via a worldwide network of distributors,
retailers and Internet entities. NuTech Digital also has broadcast availability,
DRM, and video on demand for many of its new products. NuTech Digital recently
introduced its DRM technology, which enables the secure distribution of
high-resolution digital content via the Internet http://www.nutechdigital.tv.
NuTech's Digital's DRM platform allows its feature films, concerts, children's
animated films, karaoke software, Japanese animation and late-night programming
to be accessed via secure downloads and included in online subscription
services. NuTech Digital also facilitates authoring services to content
providers in the entertainment industry.
Cautionary Statement
This press release contains forward-looking
statements that involve risks, uncertainties and assumptions that if they
never materialize or prove incorrect, could cause NuTech Digital, Inc.'s
results to differ materially from those expressed or implied by such forward-looking
statements. All statements other than statements of historical fact are
statements that could be deemed forward-looking statements, including any
projections of earnings, revenue, or other financial items, any statements
of the plans, strategies, and objectives of management for future operations,
any statements concerning proposed new products, services or developments,
any statements regarding future economic conditions or performance, statements
of belief and any statements of assumptions underlying any of the foregoing.
These statements are based on expectations as of the date of this press
release. Actual results may differ materially from those projected because
of a number of risks and uncertainties, including those detailed from time
to time in NuTech Digital, Inc.'s reports filed with the Securities and
Exchange Commission.
Contact:
NuTech Digital, Inc.
Investor Relations
Carmen Castillo
818-994-3831 x 10
ccastillo@nutechdigital.tv
--------------------------------------------------------------------------------
Source: NuTech Digital, Inc. |
Charts Provided Courtesy
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