CPNE Rebounding Admirably
November 11, 2006 @ 12:45 pm
Post earnings CPNE blew off in a scary fashion, but with the perspective of a week in the rear view mirror things are looking considerably rosier.
The sell off was a classic “buy the rumor, sell the news” trading pattern, no doubt exacerbated by the shares early financiers have been consistently pumping into the market.
This is not necessarily a bad thing. These guys are making a lot of money, but they also took a lot of risk before the company was successful. Now- three years later- they are cashing in. This is the way it is with all developmental companies- old money gets out and new gets in as the fundamentals justify higher levels. Without them, you might have to pay $3.50 for this stock right now.
As I wrote post earnings- you should only hold the stock if you were prepared to hold down to about $1- we got to $1.18 on Tuesday very briefly. Bargain hunters swooped in.
Here’s a pretty complex chart from Friday’s post close, and it sure looks good. It suggests a couple of scenarios.
First, there have been two major blowoffs in the stock in the last two months- both of which were followed by strong rallies. Note the lows are getting higher with each successive blow out. This suggests these violent sell offs need to be bought.
Secondly,the stock broke above a little mini downtrend line from this past week’s action. That’s a big short term positive. If the stock can trade up just a few more cents, we will have a “double repo” condition- also known as a traders “bread and butter” trade.
If the stock can just find its way about the $1.48 level- a move above the Dinapoli 3×3 moving average, it could break out. Traders look for this pattern all the time. It has to happen within 8 trading bars of the last time it dropped down below the 3×3- in this case it was Tuesday.
Despite the miserable week after what should have been a great earnings move, the stock is behaving like a champ. Last quarter’s earnings justify a much higher stock price, and if the trend continues it should get there sooner or later.
Comments and questions are welcome.
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geez.. this just cant hold onto any ground… we managed to get to 1.60 with that last news and here we are again in the low 1.40s. It seems the Q4 news (when is that? early Feburary?)is the only thing substantial enough to get a good run going and (most importantly) hold it up there.
Even with all the selling from large stakeholders, these are bargain prices and people should be buying it.
I guess the key word there is SHOULD. CP is getting word out there - tradeshows (good thing) and these Website promotors (sorta good, i guess) - but in the grand scheme thats not exactly national advertising…
sorry for the rant… just frustrated i guess
thanx for the blog here.. very helpful…
Crockett.
Editor: As am I frustrated by the stock’s poor performance relative to the corporate achievements. I think people would buy the heck out of it if the stock could get momentum. Since it can’t, I’m sure there are those who will lose patience and sell. We’ll see what happens from here. The way this stock is trading right now, I would be in a hurry to buy more. I would look for another of those brief sell offs to add to a position. Right now, if one of the sellers chose to simply dump 1/4 million shares, the stock would probably trade down rapidly again.
Comment by crockett — 12/11/2006 @ 10:33 am
Does Commerce Planet provide mid-quarter updates in terms of both expectations for revenues and earnings for the quarter? If so, when might investors expect one?
Editor: I have suggested to the CEO that they do one, but they have not done one yet. Since it is now pretty far past mid quarter, it seems unlikely they will take my suggestion. Therefore, I wouldn’t expect one at this point.
Comment by Allan — 12/10/2006 @ 7:44 pm
the only way this stock will hit two bucks is with a rs-stick a fork in it its done
Editor: You could easily be right about that. This idea may have run its course. I think it’s all about the numbers and time. If Q4 is as good as Q3, and the company continues to grow in Q1, it will inevitably go to $2 and higher. It’s just a question of the market chewing through the excess supply from the early financiers. If the company starts sliding backwards, it’s all over. The only thing I know for sure is that I’ll be around to see which way it comes out.
Comment by jr — 12/5/2006 @ 3:22 am
So Editor,
What are your thoughts on how this quarter is going? Also What are you projecting to happen in 2007? I am seeing good things, maybe I just want to see what others are thinking.
Editor: Tough to say- you have a couple of things going for you, and a couple against you. For example, Q4 is seasonally their worst quarter of the year. During the Holiday season subscribers turn their attention elsewhere. Q1 is seasonally their best quarter. Therefore- I expect them to do extremely well vs Q4 ‘05. If they can simply match the performance in Q3 ‘06, I believe that would be huge. It seems to me you have to give them the benefit of the doubt after three quarters of outstanding earnings growth. I’m looking for Q4 to continue to suggest the stock is very undervalued at this $1.50 level. They should kick butt in Q1 ‘07. The only number I could give you would be a guess at $7 to $8 million, and $3 million in profits once again in Q4.
Comment by John — 12/1/2006 @ 7:54 am
so if finally made it to 1.48-1.50 range again.
Just wondering… it was a little longer than 8 trading days but does your “Dinapoli 3×3″ scenario still hold true?
Glad to see this turnaround… a loooong time coming…
Crockett
Editor: The Dinapoli 3×3 was breached back when the stock traded above $1.33- it’s trading nicely above that level right now, which is bullish. The next interesting level is $1.55-That’s the downtrend line drawn across the tops from the October high of $1.80. If it can get above that level, it could still bring $2 into the crosshairs. The problem here continues to be supply from the old financiers. They appear to be pigs. If they would simply leave it alone I bet it would head to $2 in short order. If you’re a buyer, it’s heaven sent. If you’re looking for a better valuation like me, it’s a nightmare.
Comment by crockett — 11/30/2006 @ 8:09 pm
To change subject,
Don’t FMLY you do remember that one don’t you? anyway, don’t they have a hand in the release of the new Rocky film?
Editor: Just for future reference, this section is for comments on CPNE- answer to your question- no- they were involved in a “Rambo”- I don’t know where that one is.
Comment by martin kraslen — 11/30/2006 @ 8:00 am
Last quarters earnings demonstrated spectacular growth but the stock didn’t respond as favorably as one might have expected. (The price rose and then sold off). In your opinion, what kind of news would make this stock take off? What are investors waiting for?
Editor: I believe the company simply needs to get its story out to a wider audience which now needs to include institutional investors. Clearly, between $1.50 and $2, there is supply. It’s market does not have enough volume to handle the supply at this time. If they continue to deliver the numbers as they have over the last 3 quarters, it is inevitable the institutional markets will “discover” this company. A couple more quarters of $3 million in profits, and someone will just buy the company for the cash alone. Another possibility- if the stock starts behaving better, momentum traders will come back in and bid it up. The company has some plans to start getting its story out to a wider audience.
Comment by Dave — 11/26/2006 @ 10:08 am
Can you provide us with an updated technical analysis of the stock price similar to the one provided on November 11th. Is $1.00 still viewed as technical support, or has the technical support price risen given buyers seemed to appear at the $1.18 level? A bullish sign?
Editor: I believe a technical look at the stock is in order. I will post a new BLOG with a chart in the next day or two. Thanks for the suggestion.
Comment by Dave — 11/26/2006 @ 10:04 am
I notice that Yahoo’s Finance website does not have a full year chart available for this particular stock. Can you recommend another website that would allow me to view a full year candlestick chart for Commerce Planet. Thanks!
Editor: That is kind of strange- they only have a 5 day chart. www.Bigcharts.com is a very good resource for free charts. Here’s a link to the one year version: http://bigcharts.marketwatch.com/quickchart/quickchart.asp?symb=cpne&sid=0&o_symb=cpne&x=0&y=0
The one year chart is fairly compelling. It shows a stock that has done very well and is simply in a consolidation phase.
Comment by David — 11/23/2006 @ 5:38 pm
Another view re early investor selling:
– these investor’s business model is to invest in startups and help guide them to profitability
– they have achieved their goals with CPNE and are no longer on the board
– they likely need to cycle capital into other projects that fit their business model
– they have already made plenty on their investment
– they are not necessarily selling all of their shares, they may be keeping some invested which would be a sign of confidence
Given that CPNE growth is sustained over 3 quarters (and looking good for the 4th quarter), is it really likely that they are hiding fundamental problems? Seems like the problems would have showed up by now. The selling creates problems for the PPS, but doesn’t necessarily reflect on the company’s fundamentals.
Editor: Dear Don: You have summed it up perfectly. I will probably use your observations in a future edition. People are making a lot of this insider selling, but as you point out, the early shareholders who took a lot of risk are simply doing what early shareholders do. There is nothing wrong or negative about this company we can learn from early shareholders selling. The issue is simple- can they sustain the current financial performance?, and can it continue to grow?- if so, this one will trade much higher at some point in the future. My concern is that this company is a “flash in the pan” and won’t be able to sustain this level of performance. BrandPartners comes to mind- that company had a couple of great quarters, the market loved it, then it completely bombed. However, in the case of BPTR, a lot of their earnings for a couple of quarters related to negotiated forgiveness of debt- CPNE on the other hand is simply generating tons of excess cash. That is powerful. A couple more quarters of performance equivalent to Q3 should put this stock much higher. We don’t see the next hard numbers until the end of March. That could be a problem for the stock. Q4 is seasonally the slowest- Q1 is seasonally the best. I believe the tale will be told by mid May, which is when we will see Q1 numbers- that would be a solid year of earnings. $5 is not unrealistic if they can keep growing. $.50 is not unrealistic if they go the other way. So far, I believe the company has earned loyalty until proven otherwise. You won’t find a better speculative idea in the microcap world.
Comment by Don — 11/20/2006 @ 1:00 pm
Basic Question: original investors can’t be dummies. Why would they sell when their company is getting it all together in fine fashion? That doesn’t make any sense to me? If they have 8 million shares between them, then, wow!! they should make a bundle when it goes to $7.50, which is where it should be. 40 million isn’t chump change, no matter how rich you are (except maybe the megarich) so it makes absolutely no sense to me they would be selling it down. There must be another reason. BD
Editor: As another contributor points out, nearly all early shareholders who took a lot of risk will sell as their investment pays off. Just because they are selling some shares, doesn’t mean they don’t believe the stock could go higher. They might need that capital for other endeavors. They put up the money, they took the risk. If they want to sell, that’s the normal order of things. I can tell you this with a great deal of certainty- at this point, they don’t know anymore than you or I about how business is at the company today. They are making decisions on the same information you and I have. In my view- two more quarters of this kind of performance, and the market will really believe. That takes us out to mid May. That will mark a full year of earnings. In the case of this one, I believe we should give them the benefit of the doubt- the company will continue on the same path until proven otherwise.
Comment by OTCJournal Editor — 11/20/2006 @ 9:04 am
Can you comment on Commerce Planet Inc.’s press release of November 17, 2006. Also, can you explain to me how Legacy Media earns its revenues. In particular, the press release speaks leads increasing significantly - how do leads result in revenues for the company, and where does the company get its leads from? (I’m not sure I understand the basics in terms of how this company earns its revenues generally) Also, how would you characterize the revenue growth of Commerce Planet Inc.’s Legacy Media subsidiary for the month of October?
Editor: Sure- Legacy Media is CPNE’s division that performs the electronic marketing to bring in new subscribers to the service. They do it through emails and web site advertising. The new subscriber flow comes in through this division. They are now branching out and offering the service up to other companies- not just to themselves. Of the $700k they did in October- I’m not sure how much of that was for outside customers- in the past the bulk of it has been CPNE simply hiring its own subsidiary. Hence the difference in the combined revenues and the final revenues- they can’t count revenues when they pay themselves. The company is providing a hint subscription revenues will continue to be strong, and revenues will begin to flow from new sources. If subscription revenues remain the same, numbers will go up again in Q4 it would appear at this time.
Comment by John — 11/18/2006 @ 2:02 pm
Man this stock is tough on the heart. Almost pulled the [sell] trigger at 1.21 today. I just believe this should be worth $2. Any good TA advice from here? With the low volume, I have a hard time solidifying an opinion. I was up in that area last week, I should have stopped by and said hi.
Holding with steel nerves @ a base of .97, and maybe a heart replacement.
Editor: I’m sticking by what I said- if you are not prepared to hold this one to $1, then sell it. I’m not saying it’s going there, I’m just saying it’s a possiblity you should be prepared for. I believe it should be trading at more than $2 based on corporate performance. However, if you look at the year, the stock has come a long way off the bottom. A period of consolidation where old money gets out and new money comes in is fairly normal. If you look at the chart going back to March, even at $1 this stock is still in an uptrend. You want my advice: figure out how to buy more if it gets down to $1- One thing I like- it is pulling back on very light volume, suggesting a surge of buy side volume could take it back up very easily.
Comment by Bob Smith — 11/16/2006 @ 3:35 pm
If you look at the positive side. How much more can these guys sell at this rate. They are bound to eventually have no more stock. I think the stock price is holding up quite well considering the dummys that are selling. Imagine when they have nothing left to sell. Watch out it will take off and really be Commerce Planet!
Editor: There’s really two bright sides: 1. The number of shares is absolutely finite as the are no convertible securities of any kind left, and the company has no interest or need in raising new money, and 2. This excess supply is allowing interested parties the opportunity to accumulate this stock while the price stays far below the company’s real value. Just my opinion, but apparently many share it.
Comment by Jerry — 11/13/2006 @ 2:33 pm