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To
OTC Journal Members:
There were two new BLOG postings
for your review this week. First, I covered an 8K filing on Titan (or
should I say Titanic) (OTC BB: TTGLE), which had more moderately disturbing
news contained within. Secondly, I covered the year end audited financial
statements issued by PhotoChannel Networks (OTC BB: PNIWF) this
week. If you read that entry, and pounced on the stock, you are enjoying
a nice little ride right now.
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or oversold levels in volatile markets.
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The PhotoChannel
(OTC BB: PNWIF) Success: Anatomy of a Victory |
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Last week I provided a full recap
of the recent Titan Disaster, and squarely took the blame for misjudging
management's capability to manage their behemoth microcap.
If I'm going to take the heat for
the disasters, I also deserve a little credit for the wins. PhotoChannel,
a stock I have been covering since October 2006 at $1.80 (today
closed at $3.87), looks like it is developing into the real deal.
Here's a recap for those of you who may be new to the story and/or want
to revisit.
I love the PNWIF business
model, as it is low overhead, low risk, and doesn't require a huge infrastructure
commitment. Here's what the company does: In a nut shell, they provide
the online interface between a customer who wants to order photo prints
of digital images, and the store where said customer can go pick them up.
It's called "online to retail",
and here's how it works. You take a bunch of digital pictures with your
camera. You want prints. You upload them to a web site. You order your
prints. You go into the store and pick them up in one hour.
What PNWIF does? - they provide
the web interface where you download and order on behalf of the store.
They process your order and route it to the store, and they get paid a
few cents for every print you order.
PNWIF does not own any photo
processing equipment- the equipment is in the stores. It's just a huge
data storage facility (because they have to store your images in your photo
album), and a bunch of web designers, code writers, and software.
Therefore, PNWIF does not
have to go out and acquire the customers, nor does it have to finance and
own the fulfillment center. Low overhead, high margins, recurring revenues.
No customer acquisition costs- pretty good stuff all around.
This past week PNWIF announced
year end numbers, which are already very stale as their fiscal year ended
on Sept 30. For a complete review read this week's BLOG posting.
Condensed: Revs up 84% to $7.5 million, real cash losses from operations
about $1.5 million, and a dramatic move up to 64% high margin transactional
revenue (up from 42%)- a very bullish sign. They also have $7 million in
cash and no long term debt.
PNWIF provides its services
for a number of customers- the biggest being the 5,000 plus CVS
chain the US. It also has Kmart and Eckerd Drug in the US.
PNWIF
also services WalMart, Costco, and Shoppers Drug in Canada,
and a number of other smaller names.
Their have been a few recent coups
out of the company that have the stock powering higher. First and foremost-
they landed Costco US back in November, which should be a
major game changer for their revenues. Early this week, it was disclosed
they have also landed Sam's Club US, which is the first foot in
the door to WalMart.
The Costco and Sam's Club
business wins are important on several levels. Not only will they provide
huge top line growth once implemented, but these are also defections from
former provider Hewlett Packard (NYSE: HPQ). Tiny little obscure
PhotoChannel
is simply stealing HP's business. These huge retailers are moving towards
a better mousetrap.
Today, as the market opened, PNWIF
announced they have now won Wal-Mart Argentina- an emerging markets
story.
Here's a weekly chart of the stock
going back to my first coverage of the company. It's a long term look.
You can see this week's beautiful move in the last bar- heading back up
to a closing of nearly $4. I am only looking at longer term pictures
because we are in a Bear Market, and as such we won't find many short term
trades on the long side. Anything you own, think a little longer term.
Looking out the the future, there
are some pending events which could propel the stock to much higher levels.
First- neither Costco nor Sam's Club have begun using the
service. PNWIF is migrating data and setting up interfaces now,
with the expectation of flipping the switch with both companies about April
1st. Costco is supposed to be a game changer- perhaps to the tune
of $10 million in annual sales. PNWIF doesn't know how big
it's going to be.
Also, Q1 numbers, their traditionally
strongest quarter, are due out in the next couple of weeks. I have reason
to believe, thanks to one of our stalwart and contributing members, that
their performance is going to be very strong. Check out this web page,
which monitors web traffic.
http://www.quantcast.com/pnimedia.com
Note the PNI (belonging to PhotoChannel)
sites are ranked 689 in the world- a huge number. Also, if you click on
the traffic tab, you will see a huge spike in visits in November and December.
Lots of customers were ordering prints online, with CVS being the
biggest contributor.
So, if you're wondering what all
the hoopla is about, there's your recap. PNWIF delivering on all
12 cylinders. Here's one more potential catalyst for the stock price- if
PNWIF
can find it's way North of $4, and stay there for a while, a NASDAQ
Small Cap listing would be the likely outcome.
One victory in a pretty tough environment.
After last week, I'll take it: happy to have it. I still believe this one
could be at $10 stock someday and/or a potential acquisition target in
2009. The one big HP Customer remaining: WalMart. PNWIF already
has WalMart Canada and Argentina, and Sam's Club US. Could big daddy be
far behind?
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