To OTC Journal Members:
 

PhotoChannel (OTC BB: PNWIF): Q4 and Q1 Numbers Rocketing

PhotoChannel provided disclosure on the company's Q4 performance today, and a Q1 update. I know the timetable is confusing, but here's the way it is- while the rest of the world is talking about Q4 numbers as being Oct - Dec- PhotoChannel's fiscal year ended at the end of September. Therefore, when they say Q4, they mean July to September- Q1 means October to December. We haven't gotten the year end numbers yet because they are completing their audit.

Based on the numbers that were released today, there is little doubt as to why shares of PHCHF have risen 175% over the past five months. If this trend continues, look for another 175% over the next five months.

After 8 years of losses, technology development, and capital raising, these guys are now in the cat bird seat and their numbers are starting to go through the roof. The capital raising is over, and the money collecting is in full swing. The digital photography revolution is here, and PHCHF has one of the highest profit margin business models in the industry.

Here's some highlights from today's news:

• In Q4 the company recorded a net EBITDA profit of $43,000. While that doesn't sound like a lot, it was their first profitable quarter in their nine year history. It was a substantial turn around from huge losses the same quarter the previous year. The trend is strong.
• The dollar value of the orders being processed on their interface in Q4 rose 216% over the same quarter the previous year. Since they get a percentage of every photo processed using their system, revenues should have also risen in kind.
• Over the last two months (October and November), the dollar volume of sales using their system has increased 264% over the same two months last year.
• The company recently entered into a joint marketing agreement with photoprocessing behemoth Kodak (NYSE: EK). Kodak has been admitedly a little late to the digital photography revolution, but is trying to make up ground.
• On November 1 PHCHF launched a new gift site for the CVS Pharmacy chain of 5,000 outlets in time for the holiday buying season. This should also help accelerate revenue growth in Q1.
• As of today, PHCHF has $3 million in cash in the bank. More importantly, that number is going up consistently, not down, for the first time in their history.

In my view, the beauty of the PHCHF business model is low overhead and high margins. Remember, they only provide the back end web presence for brick and morter stores like Costco Canada, WalMart Canada, and CVS Pharmacies. The stores provide the customers and the photofinishing equipment. PHCHF collects a couple of cents for every photo processed using their web interface, and doesn't have the monster overhead of commercial real estate space and big equipment investments.

Let's look at how the market is treating this stock. The market definately likes PHCHF. This is a weekly chart- it measures the closing price of the stock on a week by week basis. The price has climbed consistently since June along with substantially increased volume. One issue worth noting- this stock has been trading post 10 for 1 reverse split for about one month. It has held beautifully with only a small retracement from the multi year high, proving that not all reverse splits are bad.

I first reintroduced this idea back at $1.80 in September, so in my view we are just getting rolling. Since a number of you have emailed me about the Dinapoli 3x3 moving average, I included it on this chart. It's the blue line. Since the stock changed character in June, it has rebounded back above the 3x3 everytime it dropped below. The arrows point to each of the drops. It's trying to break back above right now. That's the technicians "bread and butter" trade.

This stock just needs another volume surge to get it rolling up again. Today's post close news might be just what the doctor ordered. I still like this one for $4 to $5, with an SSL of $2.10 based on today's market. Upcoming epiphanal events which could get the stock really moving include today's news, news of new retailers signing up as a result of the Kodak relationship, and final year end and Q1 numbers.

Here is the complete text of today's news release for your review:
 

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